Pensions in Europe: Which countries are best and worst to retire in?

Earnings-linked pensions constitute the vast majority of the main source of income for Europeans over 65 years of age. However, less than half of EU citizens are confident that they will have enough money to live comfortably during your retirement. In several countries, this level of confidence drops to 30% or even less. This raises fears about the adequacy of pensions.

Protecting older people against poverty is a key function of pension systems. Retirement pensions are periodic payments destinated to:

1. Maintain the beneficiary’s income upon retirement from gainful employment at the legal or standard age.
2. Maintain seniors’ income (except when payments are made only for a limited period).

Huge pension disparities in Europe

According to Eurostat, the Retirement pensions in Europe vary considerably both in nominal terms and in purchasing power standards (EPA). To simplify the data, ‘Euronews Business’ has converted annual pension income into monthly amounts by dividing them by 12 months.

In 2021, the average gross monthly expenditure on old-age pensions per beneficiary within the EU varied greatly, from 2,575 Luxembourg euros until the 226 euros from Bulgariawith a community average of 1,224 euros.

If the countries of the European Free Trade Association (EFTA) and the countries EU candidatesIceland recorded the highest average, 2,762 euros, and Albania the lowest, 131 euros.

The four large economies of the EU and the Nordic countries, above the EU average

The pension per beneficiary exceeded the EU average in the four main EU economies. Italy recorded the highest pensionwith 1,561 euros, while France, Spain and Germany showed almost identical figures, around 1,450 euros each.

Countries nordic They also obtained good results, with average old-age pensions higher than those of these four nations.

Balkan countries have the lowest pensions

The seven lowest places in the ranking correspond to the Balkan countries. The average expenditure on old-age pensions in Luxembourg is almost 11 times higher than in Bulgaria, which highlights important disparities. Even discounting Luxembourg as an outlier, the EU average was still almost six times higher than that recorded in Bulgaria.

Some of these pension disparities can be attributed to the different price levels between Member States of the EU, as Eurostat points out that the overall cost of living differs significantly across the region.

Pension disparities are significantly reduced in EPA terms

In purchasing power standards (EPA), an artificial monetary unit that adjusts price level differences between countriesthe disparities decrease significantly.

In EPA terms, 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 higher than one in Bulgaria.

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

The Confidence levels vary considerably from one country to another: Luxembourg (61%), the Netherlands (59%) and Denmark (58%) are the countries with the highest trust. In contrast, the lowest levels of trust are observed in Latvia (23%), Slovenia (27%) and Poland (28%).

Strong correlation: pensions and confidence in retirement

‘Euronews Business’ has found a strong positive correlation between the level of financial confidence in living comfortably in retirement and monthly pension amount retirement.

This correlation indicates that the trust levels are higher in countries with higher pensionswhile confidence tends to decrease in places with smaller pensions.

The European Parliament highlights the risk of poverty in old age

Expert groups and interested parties have presented a series of recommendations to beef up both the sustainability and the adequacy of the pension systems of the EU, according to the European Parliament report.

“The way pension systems are currently designed leaves a increasing number of people at risk of poverty in old age. This trend is contrary to the EU’s efforts to reduce poverty,” the report warns.

Challenges in international pension comparison

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

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“It is important to reiterate that these figures on pension spending per beneficiary do not necessarily reflect the level or adequacy of individual old-age pensions in the different countries”, reminds Eurostat.