Pensions versus income: Albanians the poorest in Europe

Pensions in the European Union amount to about three-fifths of late-career earnings. In many European countries, this ratio falls below 50%, making it increasingly challenging for retirees to maintain a decent standard of living.

The purchasing power of an Albanian pensioner is the lowest in Europe. Albanian pensioners also rank among the last in Europe in terms of the ratio of pensioner to income at the end of their career. This means that if an individual aged 50-59 has earned 500 euros, they will only receive 37% of that payment in retirement.

In many European countries, pension income is significantly lower than pre-retirement earnings. This makes it difficult for many older people to maintain their standard of living after retirement. Almost one in six pensioners in the EU is at risk of poverty, with the rate rising from 12% in 2013 to 15.5% in 2023.

So how do pensions compare to pre-retirement income in Europe? In which countries do retirees receive the highest and lowest share of their income from work at the end of their careers?

To assess the effectiveness of pension systems, Eurostat uses the General Replacement Coefficient, which indicates whether pensions enable older people to maintain their standard of living after retirement.

This indicator compares the average retirement income of individuals aged 65–74 with the average working income of people aged 50–59, excluding other social benefits. It helps to understand how adequate pensions are.

In 2023, the replacement rate in the EU was 58%, meaning that a person who earned 100 euros between the ages of 50–59 would receive 58 euros in retirement between the ages of 65–74.

In the EU, this ratio ranged from 35% in Croatia to 78% in Greece.

Spain (77%) and Italy (75%) followed Greece at the top, while Portugal also exceeded the EU average with a ratio of 61%.

At the bottom of the ranking, Lithuania (36%) and Ireland (39%) followed Croatia, making up the three countries with a replacement rate below 40% in the EU.

In Albania, the replacement rate is 37%, making Albanian pensioners among the poorest in Europe, and the poorest in the region.

Pensions in the four largest EU economies: Germany with the lowest rate

Among the four largest EU economies, Germany had the lowest pension ratio to late-career earnings, at just 49%. Meanwhile, France (59%) stood just above the EU average.

On the other hand, Spain and Italy ranked among the top three countries, with rates above 75%.

In 11 EU member states, pensions accounted for less than half of people's average income at the end of their working lives. Some of these countries were Germany (49%), Belgium (48%) and Denmark (47%).

Among EU candidate countries, Serbia (46%), Montenegro (38%) and Albania (37%) also had lower pension income replacement rates, moving closer to Eastern European countries.

The gender gap in pensions: Persistent inequalities

The General Replacement Rate also varies by gender. In the EU, men (60%) receive three percentage points more than women (57%).

Even in Albania, the coefficient for female pensioners is lower than that of men.

In some European countries, the retirement income replacement ratio was higher for women than for men.

For example, in Germany, pensions accounted for 54% of late-career work income for women, compared to 46% for men.

This trend was also observed in Denmark and Ireland, where the ratio was 6 percentage points higher for women.

On the other hand, Spain and Portugal are the most disadvantaged countries for female retirees. In Spain, the replacement ratio was 63% for women, significantly lower than the 83% for men.

Similarly, in Portugal, women had a 50% ratio, compared to 71% for men, meaning that female pensioners received 30% less than men.

Which countries offer the highest pensions?

Large differences in pensions are observed across Europe. In 2021, the average gross monthly expenditure on old-age pensions per beneficiary ranged from €226 in Bulgaria to €2,575 in Luxembourg. The EU average was €1,294.

In nominal terms, Western and Northern European countries have the highest pensions, while Eastern and Southeastern Europe spend much less on pensions per person.

The gap narrows when pensions are adjusted according to purchasing power parity (PPP), ranging from €437 in Bulgaria to €1,681 in Luxembourg within the EU.

Western and Northern European countries continue to have the highest pensions, while Eastern European and Balkan countries report lower figures.

In particular, Switzerland's ranking drops significantly when calculating pensions according to purchasing power standards (PPS), while Romania and Turkey improve significantly compared to their rankings for nominal pensions.

The purchasing power of an Albanian pensioner is the lowest in Europe./ Euronews, Monitor