The UK has the sixth best pensions system in Europe but cannot afford to be complacent, a report has revealed.
Aon Consulting, which looked at both state and company pension schemes in 15 EU countries and ranked them according to their size and sustainability, put the UK ahead of other similar large industrial economies such as France, Germany and Italy.
It said despite reports of the dire state of pension schemes in the UK, Britain actually performed comparatively well compared with its European counterparts.
But it warned that the " inadequate" state pension was continuing to worsen and that legislation was stifling the provision of company schemes.
Donald Duval, chief actuary of Aon Consulting, said: " Despite a lot of the hype, the UK pension system is in reasonable shape overall, but things are going in the wrong direction.
" On current policy, the UK will slip steadily down the European rankings because company pension provision is now declining, and the state pension is becoming increasingly inadequate."
Portugal topped the poll for having the best pensions, followed by Ireland and the Netherlands, with Sweden and Denmark also beating the UK.
The group claimed Belgium had the worst pension schemes, with one of the least generous state pensions in Europe, followed by Italy, Germany, Greece and France.
Aon said the UK also benefited from having the third highest proportion of people aged between 55 and 64 who were still employed.
It said this was good for the sustainability of UK pensions as it showed that older workers were continuing to generate wealth and were not drawing on their savings until later in life.
The report comes a week before the Pensions Commission, headed by Lord Turner, publishes its report into the UK pensions system.
Mr Duval said: "Turner needs to recommend, and the Government needs to implement, actions which will improve the adequacy of the state pension and revive company pension schemes."
Increasing the state pension age to 67, as the Commission is expected to urge, would cost UK businesses more than £4 billion a year in absenteeism, according to a separate report.
Cass Business School warned that while raising the retirement age would help to address the burgeoning costs of an ageing population, it ignored the problems and associated costs of older workers taking more time off due to ill health.
The report said there were currently 11.1 million people receiving the state pension, and this would rise to 12.8 million by 2025 if the state pension age was 65 for both men and women.
However if the state pension age was increased to 67, there would only be 11.2 million people claiming the state pension in 2025, saving the Government nearly £8 billion a year.
But it claimed that while this was a considerable saving for the Government, it shifted the burden of cost to industry and failed to address the viability of working until 67.
It added that the £4 billion figure was based on absenteeism alone, and did not factor in the declining productivity of workers as they aged.
At the same time it said an increase in the number of people claiming sickness and incapacity benefits would cost the Government an extra £2 billion a year.
