Britain has the least generous pension system in Europe, a fact that gives it the most sustainable structure of any leading European power, a study has found.

The report by Aon Consulting compared the standard state pension with average wages in each European Union member state. Britain came bottom of the list.

However, the UK system scored highly for “affordability and sustainability”, coming third in the list, after Estonia and Latvia. “The poorer the state pension, the more affordable it becomes,” the report said.

Britain also has a more favourable demographic profile than other EU countries and has relatively strong levels of corporate pensions, the report found.

As a result, the UK came sixth out of 25 in the overall ranking designed to illustrate the long-term health of the pension system from the perspective of multinational companies. The report said: “Implicit in our analysis is the view that if intolerable pressures build up in the pensions system, then these will hit employers in some way, probably through higher social security contributions or compulsory contributions towards private pensions, but possibly in other ways, such as industrial unrest.”

Denmark came top of the list, followed by Estonia. Belgium had the worst score. The report said that Denmark had a state pension at an acceptable level coupled with the highest proportion of workers on a private pension in Europe, at 95 per cent.

The gap between the average retirement age and life expectancy is the main hazard for many EU countries’ pension systems. France comes out the worst in this ranking, with the average worker spending 20.9 years in retirement, compared with an EU average of 17.8 years and 16.6 years in Britain.

The report also noted that the UK gross state pension is tipped to increase by nearly 12 per cent over the coming 45 years, the second-highest such figure in Europe.

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