The UK government should change the "costly" state pension triple lock policy to give it more "fiscal headroom" against a continuously challenging economic background, according to the Organisation for Economic Co-operation and Development (OECD).
The Paris-based economic policy forum recommended the UK government should index state pensions to an average of the Consumer Prices Index (CPI) and wage inflation instead of the current system. It added that it should also provide direct transfers to poor pensioners to "mitigate poverty risks".
Commenting specifically on the UK in its latest Economic Outlook report, it said: "Maintaining and strengthening current fiscal efforts is essential against the challenging backdrop of high borrowing and debt, and as higher debt interest payments have eroded fiscal headroom.
"Reforming the costly triple lock uprating of state pensions would help."
It also said the UK was at risk of future financial shocks, such as another energy price increase due to the ongoing wars in Ukraine and Middle East.
At present, the triple lock means the state pension must increase every April by the highest out of average earnings, inflation or 2.5%.
The policy, introduced in 2010, has been criticised for its cost but the current Conservative government said it remained committed to its retention.
The latest increase, confirmed in the Autumn Statement, will see pension payouts increase by 8.5% from April next year.
Quilter Investors investment strategist Lindsay James said: "For the UK specifically, the economic picture continues to look murky at best and reflects accurately the OECD's wider feelings on the global economy.
"Easing inflation will help things but the OECD, like the Bank of England and the Office for Budget Responsibility, don't see too many green shoots emerging, with inflation likely to remain above the 2% target in the medium term and unemployment rising.
"While a technical recession may be dodged, it will be hard to convince people that we haven't experienced one in reality."
She added: "The OECD also gives some options to help loosen the restrictive fiscal backdrop, and although supportive of the measures in the Autumn Statement, it clearly does not think these go far enough.
"The state pension triple lock is specifically called out as one way to ease the pressure on government spending - reforming it instead to a double lock of average inflation and wage increases.
"There is a growing problem with the state pension and in its current state can be financially unpredictable and at worst unsustainable in the long run. It's unfortunate but not unsurprising that this government has not opted to make long-term decisions about reforming how the state pension is uprated, particularly given the economic benefits that could be realised with such a change."
