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Pensions in Europe: Best and Worst Countries for Retirement

Retirement prospects in Europe vary significantly, with notable disparities in pension systems across different countries. Euronews Business has identified a strong positive correlation between financial confidence in retirement and the level of monthly pensions, highlighting the importance of pension adequacy.


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Pension Systems and Financial Confidence

Earnings-related pensions are the primary source of income for Europeans aged 65 and older. However, less than half of EU consumers are confident that they will have enough money to live comfortably throughout their retirement. In several countries, this confidence level falls to 30% or even less, raising concerns about pension adequacy and the risk of old-age poverty.


Disparities in Pension Systems Across Europe

According to Eurostat, old-age pensions in Europe vary significantly in both nominal terms and purchasing power standards (PPS). To simplify the data, Euronews Business converted annual pension incomes into monthly amounts by dividing them by 12 months.

In 2021, the average gross monthly old-age pension expenditure per beneficiary within the EU ranged from €2,575 in Luxembourg to €226 in Bulgaria, with the EU average at €1,224. Including broader regions like the European Free Trade Association (EFTA) and EU candidate countries, Iceland reported the highest average at €2,762, while Albania had the lowest at €131.


High Performers: Big Four and Nordic Countries

The "Big Four" EU countries (Italy, France, Spain, and Germany) all reported pensions exceeding the EU average, with Italy leading at €1,561. Similarly, the Nordic countries, known for their robust social welfare systems, also surpassed the EU average in pension benefits.


Low Performers: Balkan Countries

Conversely, Balkan countries recorded the lowest pensions. Luxembourg's average pension was nearly 11 times higher than Bulgaria's. Even excluding Luxembourg, the EU average was still almost six times higher than Bulgaria's average pension.


Adjusted Comparisons: Purchasing Power Standards

In PPS terms, which adjust for price level differences between countries, pension disparities narrow. The average old-age pension in PPS ranges from 437 in Bulgaria to 1,681 in Luxembourg. This adjustment reflects a more balanced comparison, showing that while Luxembourg's pensions remain higher, the difference is less stark.



Retirement Confidence Across Europe

The 2023 Eurobarometer survey by the European Insurance and Occupational Pensions Authority (EIOPA) revealed that only 42% of EU consumers feel confident about their financial comfort in retirement. Confidence levels vary, with Luxembourg (61%), the Netherlands (59%), and Denmark (58%) at the high end, and Latvia (23%), Slovenia (27%), and Poland (28%) at the low end.


Correlation Between Pension Levels and Retirement Confidence

Euronews Business found a strong correlation between financial confidence and pension levels. Higher confidence is prevalent in countries with higher pensions, while lower pension amounts correlate with decreased confidence.


Addressing Old-Age Poverty

The European Parliament has highlighted the risk of old-age poverty, urging reforms to strengthen the sustainability and adequacy of EU pension systems. The current design of pension systems leaves many at risk, contradicting EU efforts to reduce poverty.


Challenges in Comparing International Pensions

Comparing pension levels internationally is challenging due to differences in pension systems, taxation, and social contributions. Eurostat's figures, derived from dividing total expenditure by the number of recipients, may not fully reflect the adequacy of individual pensions across countries.


Explore the best and worst countries for retirement in Europe, highlighting significant pension disparities, financial confidence, and the risk of old-age poverty. Learn about the factors influencing pension adequacy and sustainability.



Source: Euronews


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