Pensions in the European Union generally provide about three-fifths of an individual’s income during the last years of their career. However, this proportion is often below 50% in several EU nations, leading to increased financial challenges for pensioners trying to maintain a reasonable standard of living.
Throughout Europe, the amount retirees receive from their pensions is typically much lower than their pre-retirement earnings. This growing disparity is making it more difficult for older generations to sustain their lifestyle after leaving the workforce. Currently, nearly one in six pensioners in the EU faces the risk of poverty. This figure has risen from 12% in 2013 to 15.5% in 2023.
Eurostat’s Aggregate Replacement Ratio is used to assess how well pension systems help retirees maintain their standard of living. This ratio compares the median pension income of individuals aged 65–74 with the median income of those aged 50–59, not including other social benefits. In 2023, the EU’s aggregate replacement ratio stood at 58%, meaning a person who earned €100 during their late career would receive €58 in pension income after retirement.
The replacement ratio varied widely, from 35% in Croatia to 78% in Greece. Spain (77%) and Italy (75%) followed Greece, while Portugal (61%) also exceeded the EU average.
On the lower end, Lithuania (36%) and Ireland (39%) joined Croatia in having the lowest replacement ratios in the EU. Among the EU’s largest economies, Germany had the lowest pension income relative to pre-retirement earnings at 49%, while France (59%) was just above the EU average.
Spain and Italy were among the top three countries, offering pension replacements of over 75%. In 11 EU member states, pensions represented less than half of pre-retirement earnings, including Germany (49%), Belgium (48%), and Denmark (47%). EU candidate countries such as Serbia (46%), Montenegro (38%), and Albania (37%) had similarly low replacement rates, more aligned with those of Eastern European countries.
The pension income gap across Europe is stark. In 2021, the monthly gross old-age pension expenditure per beneficiary ranged from €226 in Bulgaria to €2,575 in Luxembourg, with the EU average being €1,294.
Western and Northern European nations tend to have the highest pension expenditures, while Eastern and Southeastern European countries report significantly lower figures. After adjusting for purchasing power standards (PPS), the gap narrows, with monthly expenditures ranging from €437 in Bulgaria to €1,681 in Luxembourg. Even so, Western and Northern Europe continue to lead in pension levels, while Eastern and Balkan countries remain at the bottom. Interestingly, Switzerland’s ranking drops when adjusted for PPS, while Romania and Turkey fare better in purchasing power terms compared to their nominal pension standings.
