There is considerable inequality in pension levels in Europe. Euronews Business found a strong positive correlation between financial confidence in retirement and the level of monthly pensions.
Pensions are, in the vast majority of cases, the main source of income for Europeans aged 65 and over. However, less than half of EU residents are confident that they will have enough money to live comfortably in retirement. In some countries, this confidence level drops to 30% or even lower. This raises concerns about the adequacy of pension benefits.
Huge differences in pensions across Europe
According to Eurostat, old-age pensions in Europe vary considerably both in nominal terms and in terms of purchasing power standards (PPS). To simplify the data, Euronews Business converted annual pension income into monthly income by dividing it by 12.
In 2021, the average monthly gross cost of old-age pensions per recipient varied widely across the EU, from €2,575 in Luxembourg to €226 in Bulgaria, with an EU average of €1,224.
If the wider European Free Trade Association (EFTA) and EU candidate countries are included in the list, the highest average is in Iceland – 2,762 euros, and the lowest – 131 euros – in Albania.
The “big four” of the EU and the Scandinavian countries are above average.
The size of the old-age pension per recipient exceeded the EU average in all the “big four” countries. Of these, Italy has the highest pension at 1,561 euros, while France, Spain and Germany showed almost identical figures at around 1,450 euros.
Scandinavian countries also showed high performance: their average old-age pensions exceed similar indicators of the “big four” countries.
Balkan countries show the lowest pensions
The seven lowest places in the ranking are occupied by the Balkan countries. The average cost of old-age pensions in Luxembourg is almost 11 times higher than in Bulgaria, indicating significant inequality. Even the EU average is still almost six times higher than that of the outsider, Bulgaria.
Some of these pension disparities can be explained by differences in price levels across EU member states, as Eurostat notes that the overall cost of living varies significantly across the region.
Pension disparities are significantly reduced in terms of PPP
In purchasing power standards (PPS) – an artificial monetary unit that adjusts for the difference in price levels between countries – the disparity is significantly reduced.
According to the PPP, the average old-age pension ranges from 437 in Bulgaria to 1,681 in Luxembourg. This means that a pensioner in Luxembourg receives a gross pension almost four times larger than in Bulgaria.
According to the Eurobarometer 2023 survey conducted by the European Insurance and Occupational Pensions Authority (EIOPA), only 42% of EU residents are confident that they will have enough money to live comfortably in retirement.
Confidence levels vary widely between countries, with Luxembourg (61%), the Netherlands (59%) and Denmark (58%) showing the highest levels of confidence. The lowest level of confidence is observed in Latvia (23%), Slovenia (27%) and Poland (28%).
Size matters
Euronews Business found a strong positive correlation between the level of financial confidence in a comfortable life in retirement and the size of the monthly old-age pension.
This correlation indicates that higher levels of confidence prevail in countries with higher pensions, while confidence tends to decrease in countries with lower pensions.
The European Parliament draws attention to the risk of poverty in the elderly
Expert groups and stakeholders have identified a number of recommendations to strengthen the sustainability and adequacy of the EU pension systems, according to the communique of the European Parliament.
“Because of the way the pension systems are set up now, an increasing number of people are at risk of ending up in old age beyond the poverty line. This trend is contrary to the EU’s efforts to reduce poverty,” the communiqué notes.
Difficulties in comparing international pensions
At the same time, comparing pensions in different countries is a difficult task due to significant differences in pension systems. The comparison often does not take into account the impact of taxation and social contributions on the size of the final pension. The figures are calculated on the basis of the Eurostat database by dividing the total expenditure on the payment of old-age pensions by the number of recipients.
“It is important to remind that these data on pension expenditures per beneficiary do not necessarily reflect the level or adequacy of individual old-age pensions in different countries,” Eurostat reminds.