Pension benefits related to earnings predominantly serve as the main financial resource for individuals in Europe who are 65 years old and above. Nevertheless, fewer than fifty percent of European Union consumers believe they will possess sufficient funds to maintain a comfortable lifestyle during their retirement years. The assurance drops below thirty percent in various nations. These statistics highlight worries regarding whether pensions will be adequate.
safeguarding elderly individuals from financial hardship is a crucial role of pension schemes. A retirement pension consists of regular payments aimed at:
1. Maintain the income of the beneficiary after retirement from paid employment at the legal or standard age; or
2. Support the income of senior citizens (with the exception of cases where payments are provided temporarily).
Large differences in pension amounts exist throughout Europe.
Eurostat indicates that old-age pensions throughout Europe differ considerably when measured in nominal values and purchasing power standards (PPS). For easier comprehension of this information, Euronews Business transformed yearly pension earnings into monthly figures by dividing these sums by twelve.
In 2021, the average gross monthly old-age pension expenditure per beneficiary within the EU varied widely, from as high as €2,575 in Luxembourg to as low as €226 in Bulgaria, with the EU average standing at €1,224.
When considering the larger group of EFTA members along with EU aspirant nations, Iceland showed the highest mean value at €2,762, whereas Albania recorded the lowest figure at €131.
'The Big Four of the EU' along with Nordic nations exceed the EU's average pension levels.
In every one of the European Union’s “Big Four” nations, the average retirement benefit for recipients surpassed the EU-wide mean. Among these countries, Italy had the most generous pension at €1,561, closely followed by France, Spain, and Germany, where the payouts were almost equal, hovering just below €1,450 each.
The Nordic countries also performed strongly, with average old-age pensions exceeding those of the "Big Four".
Balkan countries record the lowest pensions
The lowest seven rankings are all held by Balkan countries. The average expenditure on old-age pensions in Luxembourg was nearly 11 times higher than that in Bulgaria, highlighting significant disparities. Even discounting Luxembourg as an outlier, the EU average still remained almost six times higher than that recorded in Bulgaria.
Some of these pension disparities can be attributed to varying price levels across EU member states, as Eurostat notes that the overall cost of living significantly differs throughout the region.
Pension disparities narrow significantly in PPS terms
When using purchasing power standards (PPS)—an artificial currency unit that accounts for variations in prices across different nations—the discrepancies notably diminish.
In Purchasing Power Standards (PPS) terms, the average old-age pension varies from €437 in Bulgaria to €1,681 in Luxembourg. This indicates that an individual receiving a pension in Luxembourg obtained a gross benefit roughly four times greater than someone in Bulgaria.
Based on the 2023 Eurobarometer survey conducted by the European Insurance and Occupational Pensions Authority (EIOPA), just 42% of EU residents believe they will have sufficient funds for a comfortable retirement.
The data reveals considerable differences in confidence across various nations, with Luxembourg (61%), the Netherlands (59%), and Denmark (58%) showing the highest levels of trust. On the flip side, the lowest confidence rates are found in Latvia (23%), Slovenia (27%), and Poland (28%).
High association observed between pension status and confidence in retirement
Euronews Business has discovered a clear positive connection between individuals' financial comfort regarding their retirement and the size of their monthly old-age pension.
This relationship suggests that increased confidence is more common in nations offering generous pensions, whereas such trust tends to decline where pension benefits are less substantial.
The European Parliament underscores the danger of poverty among elderly individuals.
Specialized teams and key participants have presented various suggestions to enhance the sustainability and effectiveness of EU pension systems, as outlined in the European Parliament’s briefing.
The current design of pension systems puts an increasing number of individuals at risk of facing poverty during their retirement years," the briefing cautioned, noting this trend goes against the EU’s goals to decrease poverty.
Issues in comparing international pensions
Comparing international pension levels is challenging due to significant differences in pension systems. These comparisons often overlook the impact of taxation and social contributions on the final pension amounts. The figures are calculated from Eurostat’s database by dividing the total expenditure on old-age pensions by the number of recipients.
"It is important to reiterate that these figures on pension expenditure per beneficiary do not necessarily reflect the level or adequacy of individual old-age pensions in different countries", Eurostat reminds.
EmoticonEmoticon