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Pensions in Europe, we are last on the list. How do other countries compare?

2024-06-01 09:31:11Biznes SHKRUAR NGA REDAKSIA VOX

Pensions in Europe, we are last on the list. How do other countries compare?

Income-related pensions are by far the main source of income for Europeans aged 65 and over. However, less than half of EU consumers are confident they will have enough money to live comfortably throughout retirement. In some countries, this confidence level drops to 30% or even less. This raises concerns about the adequacy of pensions.

Protecting the elderly against poverty is a key function of pension systems. The old-age pension is a periodic payment aimed at:

Maintains the beneficiary's income after retirement from paid employment at legal or standard age; OR

Supports the income of elderly persons (excluding cases where payments are made only for a limited period).

Huge inequalities in pensions across Europe

According to Eurostat, old-age pensions across Europe vary significantly both in nominal terms and in purchasing power standards (PPS). To simplify the data below, annual pension incomes have been converted into monthly amounts by dividing them by 12 months. In 2021, the average monthly gross old-age pension expenditure per beneficiary within the EU varied widely, from €2,575 in Luxembourg to €226 in Bulgaria, with the EU average standing at €1,224.

Average pension expenditure per beneficiary (2021)

annual

Pensions in Europe, we are last on the list. How do other countries compare?

monthly

Pensions in Europe, we are last on the list. How do other countries compare?

 

Including the wider European Free Trade Association (EFTA) and EU candidate countries, Iceland reported the highest average at €2,762, while Albania had the lowest at €131.

The old-age pension per recipient exceeded the EU average in all the "Big Four" EU countries. Italy reported the highest pension at 1,561 euros, while France, Spain and Germany showed almost identical figures, each around 1,450 euros. The Nordic countries also performed strongly, with average old-age pensions exceeding those of the "Big Four".

The seven lowest ranked countries are all held by Balkan countries. The average expenditure on old-age pensions in Luxembourg was almost 11 times higher than in Bulgaria, underlining the considerable disparities. Even discounting Luxembourg as an outlier, the EU average remained almost six times higher than that recorded in Bulgaria.

Some of these pension disparities can be attributed to different price levels in EU member states, as Eurostat notes that the overall cost of living varies significantly across the region.

Pension inequalities narrow significantly in terms of the PPS

In purchasing power standards (PPS), an artificial currency unit that adjusts for price level differences between countries, disparities decrease significantly.

In PPS terms, the average old age pension varies from 437 in Bulgaria to 1681 in Luxembourg. This means that a pensioner in Luxembourg received a gross pension almost four times higher than in Bulgaria.

According to the Eurobarometer 2023 survey by the European Insurance and Occupational Pensions Authority (EIOPA), only 42% of EU consumers feel confident that they will have enough money to live comfortably throughout retirement.

Expert groups and stakeholders have presented a series of recommendations to strengthen the sustainability and adequacy of EU pension systems according to the European Parliament conference.

"The way pension systems are currently designed leaves an increasing number of people at risk of old-age poverty. This trend contradicts the EU's efforts to reduce poverty," he warned at the conference.

Comparing international pension levels is challenging due to significant differences in pension systems. These comparisons often overlook the impact of taxes and social contributions on final pension amounts. The figures are calculated from the Eurostat database by dividing the total expenditure on old-age pensions by the number of beneficiaries.

"It is important to reiterate that these figures for pension expenditure per beneficiary do not necessarily reflect the level or adequacy of individual old-age pensions in different countries", recalls Eurostat.

 

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