To what extent does the current pension policy approach prevent poverty among senior citizens?
Pension policies are fully aligned with the goal of preventing old-age poverty.
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Denmark
The Danish pension system is well-structured in accordance with the World Bank’s three-pillar conceptual framework. The first pillar is a tax-financed universal base pension with means-tested supplements. This pillar includes Denmark’s ATP pension scheme, which is a mandatory-funded defined benefits scheme. The second pillar comprises occupational pensions agreed as part of collective agreements and firm-specific pension schemes. These are contribution-based programs. Contribution rates are in the range of 12% to 18% for most employees. The third pillar involves tax-subsidized pension arrangements (with funds unavailable until retirement) offered by insurance companies, pension funds and banks as well as other forms of savings (for most households in the form of housing wealth). The combination of the different pillars of the pension scheme ensures protection against low income for the elderly (distributional objective) as well as a pension which is reasonable in relation to the income earned when the pensioner was active in the labor market (high replacement rates) (OECD 2023). The Danish pension scheme has for several years ranked in the top of the Melbourne Mercer Global Pension Index. The main challenges involve the complexity of the system, the possible disincentive effects on savings and retirement arising from the means testing of public pensions, and the problem of citizens outside the mandatory labor market pensions (the “residual” pension group).
Statutory ages in the pension system (in public pensions for early retirement and age limits for payment of funds from pension schemes) are established by legislation. Recent reforms – the 2006 welfare reform and the 2011 retirement reform – increased these ages considerably to cope with the aging population. First, the retirement age (early retirement and pensions) has been gradually increased and the early retirement period reduced from five to three years. Second, the statutory pension/retirement age is linked (indexed) to developments in life expectancy at the age of 60 such that the expected pension period will become 14.5 years (17.5 including early retirement) over the long run (currently, the expected pension period is between 18.5 and 23.5 years). The statutory retirement age is increased every fifth year (with a 15 years lead time). The latest increase in 2021 (applying from 2035) implies a statutory pension age of 70. A particular challenge involves how to allow people to opt out of the labor market if their health or ability to work makes it impossible to postpone retirement in concert with the general upward trend in the pension age. There are three options: The first involves taking early retirement, which is a contribution-based system allowing the eligible person to retire within a window of three years prior to the statutory pension age; the second involves receiving a senior pension, which depends on the assessed work capability; and the third involves receiving an early pension, which was recently introduced and allows those with a long career behind them the option of retiring one to three years earlier.
Statutory ages in the pension system (in public pensions for early retirement and age limits for payment of funds from pension schemes) are established by legislation. Recent reforms – the 2006 welfare reform and the 2011 retirement reform – increased these ages considerably to cope with the aging population. First, the retirement age (early retirement and pensions) has been gradually increased and the early retirement period reduced from five to three years. Second, the statutory pension/retirement age is linked (indexed) to developments in life expectancy at the age of 60 such that the expected pension period will become 14.5 years (17.5 including early retirement) over the long run (currently, the expected pension period is between 18.5 and 23.5 years). The statutory retirement age is increased every fifth year (with a 15 years lead time). The latest increase in 2021 (applying from 2035) implies a statutory pension age of 70. A particular challenge involves how to allow people to opt out of the labor market if their health or ability to work makes it impossible to postpone retirement in concert with the general upward trend in the pension age. There are three options: The first involves taking early retirement, which is a contribution-based system allowing the eligible person to retire within a window of three years prior to the statutory pension age; the second involves receiving a senior pension, which depends on the assessed work capability; and the third involves receiving an early pension, which was recently introduced and allows those with a long career behind them the option of retiring one to three years earlier.
Citations:
Andersen, T.M., S.E. Hougaard Jensen, and J. Rangvid, eds. 2022. The Danish Pension System – Design, Performance, and Challenges. Oxford: Oxford University Press.
OECD. 2023. Pensions at a Glance 2023: OECD and G20 Indicators. Paris: OECD Publishing. https://doi.org/10.1787/678055dd-en
Andersen, T.M., S.E. Hougaard Jensen, and J. Rangvid, eds. 2022. The Danish Pension System – Design, Performance, and Challenges. Oxford: Oxford University Press.
OECD. 2023. Pensions at a Glance 2023: OECD and G20 Indicators. Paris: OECD Publishing. https://doi.org/10.1787/678055dd-en
Finland
The Finnish public pension system comprises two distinct schemes: a basic residence-based, tax-financed pension scheme that includes the national pension and the guarantee pension, and a mandatory contributions-based, earnings-related pension scheme. Voluntary occupational schemes and private pension savings play a very minor role. Additionally, the elderly have access to a specific housing benefit scheme. While the earnings-related pension scheme aims at consumption smoothing, the basic residence-based pension – consisting of the national pension and the guarantee pension – aims at preventing poverty by providing an adequate old-age income for individuals in nonstandard employment or with interrupted employment biographies (e.g., low-skilled, self-employed individuals, long-term unemployed people, single parents, chronically ill individuals and those with a migration background).
With the maturation of the earnings-related pension scheme, its role in pension provision has become dominant. In 2022, 65% of retirees in Finland received only earnings-related pensions, around 29% received both earnings-related and national pensions, and 6% received only national pensions. Managed fairly successfully by the social partners and the government, the overall pension policy has largely provided adequate pension provision. Consequently, Finland has largely avoided the classic problem of poverty in old age. However, the oldest cohorts, women and retirees living alone tend to suffer from poverty more often than other retirees.
The level of guaranteed pension is clearly above that of other basic security benefits, such as flat-rate benefits for the unemployed or those on sick leave. Consequently, only a very small fraction of the elderly need to rely on basic social assistance. It is fair to say that the pension system provides an old-age income that enables all citizens to meet their basic needs.
With the maturation of the earnings-related pension scheme, its role in pension provision has become dominant. In 2022, 65% of retirees in Finland received only earnings-related pensions, around 29% received both earnings-related and national pensions, and 6% received only national pensions. Managed fairly successfully by the social partners and the government, the overall pension policy has largely provided adequate pension provision. Consequently, Finland has largely avoided the classic problem of poverty in old age. However, the oldest cohorts, women and retirees living alone tend to suffer from poverty more often than other retirees.
The level of guaranteed pension is clearly above that of other basic security benefits, such as flat-rate benefits for the unemployed or those on sick leave. Consequently, only a very small fraction of the elderly need to rely on basic social assistance. It is fair to say that the pension system provides an old-age income that enables all citizens to meet their basic needs.
Citations:
Torben M. Andersen. 2021. Pension Adequacy and Sustainability: An Evaluation of the Finnish Pension System. Helsinki: Finnish Center for Pensions.
“The Finnish Pension System: System description.” https://www.etk.fi/en/finnish-pension-system/pension-security/overview-of-pensions/system-description
Susan Kuivalainen, Juha Rantala, Kati Ahonen, Kati Kuitto, Liisa-Maria Palomäki, Jyri Liukko, eds. 2022. Eläkkeet ja eläkeläisten toimeentulo: kehitys vuosina 1995-2020 [Pensions and livelihood of retirees: development from 1995-2020]. Helsinki: Eläketurvakeskus. https://urn.fi/URN:ISBN:978-951-691-357-8
“Effective Retirement Age” https://www.etk.fi/en/statistics-2/statistics/effective-retirement-age/
Torben M. Andersen. 2021. Pension Adequacy and Sustainability: An Evaluation of the Finnish Pension System. Helsinki: Finnish Center for Pensions.
“The Finnish Pension System: System description.” https://www.etk.fi/en/finnish-pension-system/pension-security/overview-of-pensions/system-description
Susan Kuivalainen, Juha Rantala, Kati Ahonen, Kati Kuitto, Liisa-Maria Palomäki, Jyri Liukko, eds. 2022. Eläkkeet ja eläkeläisten toimeentulo: kehitys vuosina 1995-2020 [Pensions and livelihood of retirees: development from 1995-2020]. Helsinki: Eläketurvakeskus. https://urn.fi/URN:ISBN:978-951-691-357-8
“Effective Retirement Age” https://www.etk.fi/en/statistics-2/statistics/effective-retirement-age/
Norway
Since 1956, Norway has provided a universal minimum pension to all individuals with little or no additional right to a work-related pension. In 2023 the level of the minimum pension for a one-person household was 60% of the median income of all those in full employment. This is largely sufficient to prevent poverty among many elderly.
However, minimum pensioners are constantly highlighted as a group with demanding financial living conditions, particularly for elderly individuals living alone. In general, if household expenditures on vital goods are extraordinarily high (e.g., heating in the winter, medicines), additional economic assistance can be received through a means-tested scheme.
However, minimum pensioners are constantly highlighted as a group with demanding financial living conditions, particularly for elderly individuals living alone. In general, if household expenditures on vital goods are extraordinarily high (e.g., heating in the winter, medicines), additional economic assistance can be received through a means-tested scheme.
Citations:
Wright, M.Y. 2022. “Gode pensjonsordninger gir lav fattigdom blant eldre i Norge.” Memu Mennesker og Muligheter. https://memu.no/artikler/gode-pensjonsordninger-gir-lav-fattigdom-blant-eldre-i-norge/
Hetland, A. 2023. Minstepensjonister i parforhold. Statistics Norway. https://www.ssb.no/sosiale-forhold-og-kriminalitet/trygd-og-stonad/artikler/minstepensjonister-i-parforhold
Wright, M.Y. 2022. “Gode pensjonsordninger gir lav fattigdom blant eldre i Norge.” Memu Mennesker og Muligheter. https://memu.no/artikler/gode-pensjonsordninger-gir-lav-fattigdom-blant-eldre-i-norge/
Hetland, A. 2023. Minstepensjonister i parforhold. Statistics Norway. https://www.ssb.no/sosiale-forhold-og-kriminalitet/trygd-og-stonad/artikler/minstepensjonister-i-parforhold
Pension policies are largely aligned with the goal of preventing old-age poverty.
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Australia
Australia’s retirement income system consists of a means-tested age pension paid from general government revenue, mandatory employer contributions to private-sector superannuation accounts, and additional voluntary contributions from employers, employees, and the self-employed into these private sector plans. The Age Pension supports the basic living standards of older Australians and is targeted through the means test to those who need it most, with rates indexed to keep pace with price and wage increases. A recent Retirement Income Review found the system effective and broadly sustainable but noted areas for improvement, such as introducing a government superannuation contribution for primary carers of young children (Superguide 2020). The private sector superannuation system is large and complex, with potential benefits from rationalization to reduce costs and simplify the system (Murray 2020).
For retirees reliant on the Age Pension, income is generally adequate for those who own their homes but insufficient for the approximately 20% of retirees renting in the private market. It is argued that Commonwealth Rent Assistance should be increased. The current Labor government increased CRA by 15% in July 2023, but this was widely regarded as insufficient.
For retirees reliant on the Age Pension, income is generally adequate for those who own their homes but insufficient for the approximately 20% of retirees renting in the private market. It is argued that Commonwealth Rent Assistance should be increased. The current Labor government increased CRA by 15% in July 2023, but this was widely regarded as insufficient.
Citations:
Murray, C. 2020. “Superannuation isn’t a retirement income system – we should scrap it.” The Conversation. https://theconversation.com/superannuation-isnt-a-retirement-income-system-we-should-scrap-it-130191?gclid=CjwKCAiA1fqrBhA1EiwAMU5m_zZsQvUtaZOZWCDS962r-Ex9jOhDZamEIq9amNcBG-Swm9zZK6IC4BoCou0QAvD_BwE
https://www.mercer.com/assets/global/en/shared-assets/global/attachments/pdf-2023-mercer-cfa-global-pension-index-full-report-11-09-2023.pdf
Superguide. 2020. “Superguide” November 24.
Key observations from the Retirement Income Review. Superguide. https://www.superguide.com.au/how-super-works/key-observations-retirement-income-review
Murray, C. 2020. “Superannuation isn’t a retirement income system – we should scrap it.” The Conversation. https://theconversation.com/superannuation-isnt-a-retirement-income-system-we-should-scrap-it-130191?gclid=CjwKCAiA1fqrBhA1EiwAMU5m_zZsQvUtaZOZWCDS962r-Ex9jOhDZamEIq9amNcBG-Swm9zZK6IC4BoCou0QAvD_BwE
https://www.mercer.com/assets/global/en/shared-assets/global/attachments/pdf-2023-mercer-cfa-global-pension-index-full-report-11-09-2023.pdf
Superguide. 2020. “Superguide” November 24.
Key observations from the Retirement Income Review. Superguide. https://www.superguide.com.au/how-super-works/key-observations-retirement-income-review
Belgium
The Belgian pension system operates on a pay-as-you-go basis, where current workers’ social security contributions finance the pensions of current retirees, and this system will finance their future pensions. The incumbent government has increased the minimum pension levels to €1,500 per month starting in 2024 to address the risk of poverty among the elderly.
To enhance the sustainability of the Belgian pension system, the legal pension has been capped at a relatively low level of about €2500 per month (as of 2023 values). By 2030, the retirement age will be 67. Despite these measures, evaluations, including those from the European Commission’s European Semester, suggest that existing measures are insufficient, thereby endangering the sustainability of social security in Belgium. According to the Federal Planning Bureau (2020), population aging could burden the government budget by an additional 3% of GDP by 2070.
The EU-SILC database provides detailed data on poverty and social exclusion risks, primarily based on self-assessment questionnaires. Among those aged 65-74, 7.8% of the surveyed population reported experiencing some level of material or social deprivation; this figure drops to 5.2% for those aged 75 and above. Respectively, 5.8% and 3.8% reported financial difficulties in buying clothing, and the figures stand at 3.5% and 2.6% concerning heating, and 2.1% and 1.2% concerning healthcare.
While current pension levels effectively mitigate substantial poverty, the long-term sustainability of the pension system remains fragile.
To enhance the sustainability of the Belgian pension system, the legal pension has been capped at a relatively low level of about €2500 per month (as of 2023 values). By 2030, the retirement age will be 67. Despite these measures, evaluations, including those from the European Commission’s European Semester, suggest that existing measures are insufficient, thereby endangering the sustainability of social security in Belgium. According to the Federal Planning Bureau (2020), population aging could burden the government budget by an additional 3% of GDP by 2070.
The EU-SILC database provides detailed data on poverty and social exclusion risks, primarily based on self-assessment questionnaires. Among those aged 65-74, 7.8% of the surveyed population reported experiencing some level of material or social deprivation; this figure drops to 5.2% for those aged 75 and above. Respectively, 5.8% and 3.8% reported financial difficulties in buying clothing, and the figures stand at 3.5% and 2.6% concerning heating, and 2.1% and 1.2% concerning healthcare.
While current pension levels effectively mitigate substantial poverty, the long-term sustainability of the pension system remains fragile.
Citations:
Federal Planning Bureau. 2020. “Economic Policy Committee’s Aging Working Group – Belgium: Country Fiche 2020.” https://www.plan.be/uploaded/documents/202105171033170.AWG_Country_fiche_Belgium_2020_12255_March2021.pdf
European Commission. 2023. “Commission Staff Working Document. 2023 Country Report – Belgium.” COM(2023)601 Final; SWD(2023)600 final.
Federal Planning Bureau. 2020. “Economic Policy Committee’s Aging Working Group – Belgium: Country Fiche 2020.” https://www.plan.be/uploaded/documents/202105171033170.AWG_Country_fiche_Belgium_2020_12255_March2021.pdf
European Commission. 2023. “Commission Staff Working Document. 2023 Country Report – Belgium.” COM(2023)601 Final; SWD(2023)600 final.
Canada
Before the creation of Canada’s modern federal public pension programs in the early 1950s and mid-1960s, elderly poverty was very high. However, since the system’s consolidation in the mid-to-late 1960s, the modern Canadian public pension system has been quite effective in reducing poverty among the elderly. For individuals over 70 years of age in the lowest quintile of the earnings distribution, the proportion of working income “replaced” by retirement income is nearly 100% (Deaton 1989).
The basic components of Canada’s public pension retirement-income system are the Old Age Security (OAS) demogrant, the income-tested Guaranteed Income Supplement (GIS), and the contribution-fed, earnings-based Canada/Quebec Pension Plan (CPP/QPP). Benefits are capped at a percentage of the poverty rate, with the aim of preventing old-age poverty.
Other tiers of the pension system include employer pension plans (both defined-benefit and defined-contribution plans) and government incentive programs for individual saving, such as Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).
Since 1995, incomes for the elderly at the bottom have been growing, although not as quickly as those for the rest of the population. Using Statistics Canada’s Low-Income Cutoff (LICO) measure of poverty, an absolute definition, the poverty rate for people aged 65 and over was 4.7% in 2016, one of the lowest rates ever recorded in the history of the series. In contrast, Statistics Canada’s Low-Income Measure (LIM), a relative poverty definition, shows senior poverty rates have been on an upward trend in recent years, increasing from a low of 3.9% in 1995 to 14.2% in 2016. Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) were temporarily boosted during the pandemic. The 2021 federal budget announced a 10% increase in old-age security benefits once recipients turn 75, which is estimated to reduce poverty in this age group by 14.5%.
Even with the recent benefits and contribution expansion, the CPP/QPP is projected to replace only a third of the average wage up to a ceiling that will reach CAD 82,700 in 2025. Thus, middle- and upper-income workers without an employer pension plan or private savings may not be able to replace a sufficient proportion of their pre-retirement earnings. In the private sector, this issue affects three in four workers (Weaver 2016).
The basic components of Canada’s public pension retirement-income system are the Old Age Security (OAS) demogrant, the income-tested Guaranteed Income Supplement (GIS), and the contribution-fed, earnings-based Canada/Quebec Pension Plan (CPP/QPP). Benefits are capped at a percentage of the poverty rate, with the aim of preventing old-age poverty.
Other tiers of the pension system include employer pension plans (both defined-benefit and defined-contribution plans) and government incentive programs for individual saving, such as Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).
Since 1995, incomes for the elderly at the bottom have been growing, although not as quickly as those for the rest of the population. Using Statistics Canada’s Low-Income Cutoff (LICO) measure of poverty, an absolute definition, the poverty rate for people aged 65 and over was 4.7% in 2016, one of the lowest rates ever recorded in the history of the series. In contrast, Statistics Canada’s Low-Income Measure (LIM), a relative poverty definition, shows senior poverty rates have been on an upward trend in recent years, increasing from a low of 3.9% in 1995 to 14.2% in 2016. Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) were temporarily boosted during the pandemic. The 2021 federal budget announced a 10% increase in old-age security benefits once recipients turn 75, which is estimated to reduce poverty in this age group by 14.5%.
Even with the recent benefits and contribution expansion, the CPP/QPP is projected to replace only a third of the average wage up to a ceiling that will reach CAD 82,700 in 2025. Thus, middle- and upper-income workers without an employer pension plan or private savings may not be able to replace a sufficient proportion of their pre-retirement earnings. In the private sector, this issue affects three in four workers (Weaver 2016).
Citations:
Deaton, R. L. 1989. The Political Economy of Pensions: Power, Politics, and Social Change in Canada, Britain and the United States. Vancouver: UBC Press.
Weaver, R. Kent. 2016. “Privileging Policy Change? Sustaining Automatic Stabilizing Mechanisms in Public Pensions.” Social Policy & Administration 50 (2): 148-64. https://doi.org/10.1111/spol.12208
Deaton, R. L. 1989. The Political Economy of Pensions: Power, Politics, and Social Change in Canada, Britain and the United States. Vancouver: UBC Press.
Weaver, R. Kent. 2016. “Privileging Policy Change? Sustaining Automatic Stabilizing Mechanisms in Public Pensions.” Social Policy & Administration 50 (2): 148-64. https://doi.org/10.1111/spol.12208
Germany
Every employee in Germany is automatically part of the statutory pension insurance. The amount of payments that pensioners receive is based on the income they earned over the span of their working years. The statutory pension insurance can be combined with private or company plans. The use of private insurance is partially aided by the government (“Riester-Rente”) (Bundesministerium für Arbeit und Soziales, 2017).
Pensions are lower for individuals with shorter or non-continuous employment histories due to the strong link between contributions and pension payments. However, the pension system offers several measures to prevent poverty in old age for those who experience interruptions in their work histories. For instance, periods of unemployment due to illness, caring for family members, and child-rearing are, under certain conditions, treated similarly to regular employment. These periods then count toward the pension system, thereby increasing pension incomes (Bundesregierung, 2023: 4).
For child-rearing, each child is granted an additional pension amount equivalent to the average contribution payment over three years (two and a half years if the child was born before 1992) (Deutsche Rentenversicherung, n.d.A). Parents can also earn extra pension claims beyond the three years covered if they have low incomes during the first ten years of a child’s life, such as by working part-time to have more time for child-rearing. In this case, the income used for pension calculation is 50% higher than the actual income, without requiring higher contributions (Deutsche Rentenversicherung Oldenburg-Bremen, 2018).
When an individual cares for a family member, friend, or neighbor requiring high-maintenance care and, as a result, works less than full-time, the compulsory long-term care insurance, under specific circumstances, pays additional pension contributions (Deutsche Rentenversicherung, n.d.B).
Self-employed individuals are not automatically part of the statutory pension system, although they may apply for membership. There are plans to make the statutory pension system compulsory for the self-employed as well (Bundesregierung 2023: 4).
The average net income of a single pensioner per month is approximately €1,700 in West Germany and approximately €1,550 in the eastern part of the country. This is more than three times higher than the Bürgergeld, the German long-term unemployment benefit (Bundesministerium für Arbeit und Soziales, 2023a, p. 22). In 2020, expenditures on pensions amounted to 12.6% of Germany’s gross domestic product, which is slightly lower than the EU average of 13.6% (Eurostat, 2023).
However, employees in non-standard employment, low-paying jobs, or with interrupted employment histories may face much lower pensions than the average. If the pension is insufficient to ensure a dignified life, there are several additional aids available for senior citizens. The base pension (Grundrente) provides supplemental income on top of the normal pension for seniors who have worked for a long time in underpaid jobs and are therefore not eligible for a higher pension. Seniors with low incomes may also benefit from “Wohngeld,” a government-funded aid for low-income households struggling to pay their rent (Bundesregierung, 2023, p. 4).
The guaranteed minimum pension for seniors (Grundsicherung im Alter) is a safety net for people above the statutory retirement age whose pension incomes are too low to cover basic subsistence needs. It is designed to ensure that every senior can live in dignity, much like the Bürgergeld, the German long-term unemployment benefit, does for working-age individuals. The guaranteed minimum pension for seniors is thus a social welfare benefit and is not linked to statutory pension insurance (Bundesministerium für Arbeit und Soziales, 2023b).
Pensions are lower for individuals with shorter or non-continuous employment histories due to the strong link between contributions and pension payments. However, the pension system offers several measures to prevent poverty in old age for those who experience interruptions in their work histories. For instance, periods of unemployment due to illness, caring for family members, and child-rearing are, under certain conditions, treated similarly to regular employment. These periods then count toward the pension system, thereby increasing pension incomes (Bundesregierung, 2023: 4).
For child-rearing, each child is granted an additional pension amount equivalent to the average contribution payment over three years (two and a half years if the child was born before 1992) (Deutsche Rentenversicherung, n.d.A). Parents can also earn extra pension claims beyond the three years covered if they have low incomes during the first ten years of a child’s life, such as by working part-time to have more time for child-rearing. In this case, the income used for pension calculation is 50% higher than the actual income, without requiring higher contributions (Deutsche Rentenversicherung Oldenburg-Bremen, 2018).
When an individual cares for a family member, friend, or neighbor requiring high-maintenance care and, as a result, works less than full-time, the compulsory long-term care insurance, under specific circumstances, pays additional pension contributions (Deutsche Rentenversicherung, n.d.B).
Self-employed individuals are not automatically part of the statutory pension system, although they may apply for membership. There are plans to make the statutory pension system compulsory for the self-employed as well (Bundesregierung 2023: 4).
The average net income of a single pensioner per month is approximately €1,700 in West Germany and approximately €1,550 in the eastern part of the country. This is more than three times higher than the Bürgergeld, the German long-term unemployment benefit (Bundesministerium für Arbeit und Soziales, 2023a, p. 22). In 2020, expenditures on pensions amounted to 12.6% of Germany’s gross domestic product, which is slightly lower than the EU average of 13.6% (Eurostat, 2023).
However, employees in non-standard employment, low-paying jobs, or with interrupted employment histories may face much lower pensions than the average. If the pension is insufficient to ensure a dignified life, there are several additional aids available for senior citizens. The base pension (Grundrente) provides supplemental income on top of the normal pension for seniors who have worked for a long time in underpaid jobs and are therefore not eligible for a higher pension. Seniors with low incomes may also benefit from “Wohngeld,” a government-funded aid for low-income households struggling to pay their rent (Bundesregierung, 2023, p. 4).
The guaranteed minimum pension for seniors (Grundsicherung im Alter) is a safety net for people above the statutory retirement age whose pension incomes are too low to cover basic subsistence needs. It is designed to ensure that every senior can live in dignity, much like the Bürgergeld, the German long-term unemployment benefit, does for working-age individuals. The guaranteed minimum pension for seniors is thus a social welfare benefit and is not linked to statutory pension insurance (Bundesministerium für Arbeit und Soziales, 2023b).
Citations:
Bundesministerium für Arbeit und Soziales. 2017. “Gesetzliche Rentenversicherung.” https://www.bmas.de/DE/Soziales/Rente-und-Altersvorsorge/Gesetzliche-Rentenversicherung/gesetzliche-rentenversicherung-art.html
Bundesministerium für Arbeit und Soziales. 2023. “Rentenversicherungsbericht 2023.” https://www.bmas.de/DE/Service/Presse/Pressemitteilungen/2023/bundeskabinett-beschliesst-rentenversicherungsbericht-2023.html
Bundesministerium für Arbeit und Soziales. 2023b. “Grundsicherung im Alter.” https://www.bmas.de/DE/Soziales/Rente-und-Altersvorsorge/Fakten-zur-Rente/Grundsicherung-im-Alter/grundsicherung-im-alter.html
Bundesregierung. 2023. “Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Gerrit Huy, René Springer, Ulrike Schielke-Ziesing, Norbert Kleinwächter und der Fraktion der AfD: Deutsche Altersarmut und Armutsgefährdung im europäischen Vergleich.” Drucksache 20/6064.
Deutsche Rentenversicherung. n.d.A. “Kindererziehung: Ihr Plus für die Rente.” https://www.deutsche-rentenversicherung.de/DRV/DE/Rente/Familie-und-Kinder/Kindererziehung/kindererziehung_node.html
Deutsche Rentenversicherung. n.d. “Pflege von Angehörigen lohnt sich auch für die Rente.” https://www.deutsche-rentenversicherung.de/DRV/DE/Rente/Familie-und-Kinder/Angehoerige-pflegen/angehoerige-pflegen_node.html
Deutsche Rentenversicherung Oldenburg-Bremen. 2018. “Kinderberücksichtigungszeiten.” https://www.deutsche-rentenversicherung.de/OldenburgBremen/DE/Presse/Pressemitteilungen/Rententipps/rententipp_monat_2018_11.html
Eurostat. 2023. “Social protection statistics – pension expenditure and pension beneficiaries.” https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Social_protection_statistics_-_pension_expenditure_and_pension_beneficiaries
Bundesministerium für Arbeit und Soziales. 2017. “Gesetzliche Rentenversicherung.” https://www.bmas.de/DE/Soziales/Rente-und-Altersvorsorge/Gesetzliche-Rentenversicherung/gesetzliche-rentenversicherung-art.html
Bundesministerium für Arbeit und Soziales. 2023. “Rentenversicherungsbericht 2023.” https://www.bmas.de/DE/Service/Presse/Pressemitteilungen/2023/bundeskabinett-beschliesst-rentenversicherungsbericht-2023.html
Bundesministerium für Arbeit und Soziales. 2023b. “Grundsicherung im Alter.” https://www.bmas.de/DE/Soziales/Rente-und-Altersvorsorge/Fakten-zur-Rente/Grundsicherung-im-Alter/grundsicherung-im-alter.html
Bundesregierung. 2023. “Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Gerrit Huy, René Springer, Ulrike Schielke-Ziesing, Norbert Kleinwächter und der Fraktion der AfD: Deutsche Altersarmut und Armutsgefährdung im europäischen Vergleich.” Drucksache 20/6064.
Deutsche Rentenversicherung. n.d.A. “Kindererziehung: Ihr Plus für die Rente.” https://www.deutsche-rentenversicherung.de/DRV/DE/Rente/Familie-und-Kinder/Kindererziehung/kindererziehung_node.html
Deutsche Rentenversicherung. n.d. “Pflege von Angehörigen lohnt sich auch für die Rente.” https://www.deutsche-rentenversicherung.de/DRV/DE/Rente/Familie-und-Kinder/Angehoerige-pflegen/angehoerige-pflegen_node.html
Deutsche Rentenversicherung Oldenburg-Bremen. 2018. “Kinderberücksichtigungszeiten.” https://www.deutsche-rentenversicherung.de/OldenburgBremen/DE/Presse/Pressemitteilungen/Rententipps/rententipp_monat_2018_11.html
Eurostat. 2023. “Social protection statistics – pension expenditure and pension beneficiaries.” https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Social_protection_statistics_-_pension_expenditure_and_pension_beneficiaries
Sweden
The Swedish pension system consists of three components: a national public pension provided by the state, an occupational pension, and private savings or assets. The national public pension is based on a person’s total income from their working life in Sweden. For those with low or no pension, a Guarantee Pension is available, designed to provide basic protection. Financial support for the elderly is also available to individuals with very low income in retirement. This support depends on the individual’s income and housing costs to ensure a fair standard of living (Pensionsmyndigheten, 2024).
The pension system has been a focal point in political debates in recent years, and the Swedish Pensions Agency has published several evaluations. The gender gap in the national public pension system is 20%, generally a consequence of women’s lower earnings in the labor market. The difference in disposable income between genders is nearly 30%, a gap that has persisted since the 1990s. With the current pension system, it would take 40 to 50 years before pensions are fully equalized, even if incomes were equal. Policy efforts aim to narrow the pension gap; however, there are debates on whether gender gaps should be prioritized ahead of the gap between other income groups. This raises the question of whether the pension system needs reform and whether life income should be the basis for calculating pensions (Kirs & Johannisson, 2022).
In 2023, the earliest retirement age increased from 62 to 63 years. As life expectancy rises, there are further official plans to raise pension ages. Policy efforts to strengthen the pension system were implemented, and the targeted pension benefit increased by 12% in 2022. In 2023, the Guarantee Pension was removed for those residing outside Sweden (OECD, 2024), pointing to a trend of cost-cutting measures by the Swedish Pensions Agency.
The pension system has been a focal point in political debates in recent years, and the Swedish Pensions Agency has published several evaluations. The gender gap in the national public pension system is 20%, generally a consequence of women’s lower earnings in the labor market. The difference in disposable income between genders is nearly 30%, a gap that has persisted since the 1990s. With the current pension system, it would take 40 to 50 years before pensions are fully equalized, even if incomes were equal. Policy efforts aim to narrow the pension gap; however, there are debates on whether gender gaps should be prioritized ahead of the gap between other income groups. This raises the question of whether the pension system needs reform and whether life income should be the basis for calculating pensions (Kirs & Johannisson, 2022).
In 2023, the earliest retirement age increased from 62 to 63 years. As life expectancy rises, there are further official plans to raise pension ages. Policy efforts to strengthen the pension system were implemented, and the targeted pension benefit increased by 12% in 2022. In 2023, the Guarantee Pension was removed for those residing outside Sweden (OECD, 2024), pointing to a trend of cost-cutting measures by the Swedish Pensions Agency.
Citations:
Kirs, K. and Johannisson, I. 2022. Kan pensionerna bli mer jämställda? Faktaserie om pensionerna. Rapport 4. Stockholm: Pensionsmyndigheten.
OECD. 2023. Pensions at a Glance 2023: OECD and G20 Indicators. Paris: OECD Publishing. https://doi.org/10.1787/678055dd-en
Pensionsmyndigheten. 2024. “Äldreförsörjningsstöd.” https://www.pensionsmyndigheten.se/for-pensionarer/ekonomiskt-stod/ansok-om-aldreforsorjningsstod
Kirs, K. and Johannisson, I. 2022. Kan pensionerna bli mer jämställda? Faktaserie om pensionerna. Rapport 4. Stockholm: Pensionsmyndigheten.
OECD. 2023. Pensions at a Glance 2023: OECD and G20 Indicators. Paris: OECD Publishing. https://doi.org/10.1787/678055dd-en
Pensionsmyndigheten. 2024. “Äldreförsörjningsstöd.” https://www.pensionsmyndigheten.se/for-pensionarer/ekonomiskt-stod/ansok-om-aldreforsorjningsstod
7
Austria
Austria has long been considered “a haven for retirees,” especially among seniors from neighboring Germany, with average pensions about 80% higher in Austria than in Germany. A closer look, however, reveals that the whole system relies significantly on additional contributions by employed individuals and on additional tax money diverted to this sector.
As of 2023, one-fourth of the Austrian public budget is allocated to the old-age pension system. Of the €14 billion, €1.2 billion is dedicated to raising low pensions to a minimum level, while the rest goes to other pensioners. In 2021, the average retirement age was 60.9 years. According to public planning, the retirement age should be raised to 62 years by 2030 (Austrian Parliament 2022). A larger adaptation to rising lifetimes should be planned (Heer et al. 2023).
To combat the effects of recent high inflation on income, Austria – like several other countries, such as Germany, Portugal, and Poland – has implemented significant ad hoc payments for pensioners.
Given these figures, it is not surprising that Austria ranked conspicuously low in the 2023 Mercer report on the overall quality of its pension system, receiving an overall score of “C” on a scale from A to D (ranked 40 out of 47 countries). While Austrian pensions generally aim to prevent old-age poverty, the report suggested measures such as increasing the minimum level of support for the poorest elderly individuals and introducing arrangements to protect the pension interests of both parties in a divorce. As in most countries, women tend to receive significantly lower pensions. However, the key problem with the Austrian pension system has been identified as its tremendous costs and effective unsustainability (see also P14.2).
As of 2023, one-fourth of the Austrian public budget is allocated to the old-age pension system. Of the €14 billion, €1.2 billion is dedicated to raising low pensions to a minimum level, while the rest goes to other pensioners. In 2021, the average retirement age was 60.9 years. According to public planning, the retirement age should be raised to 62 years by 2030 (Austrian Parliament 2022). A larger adaptation to rising lifetimes should be planned (Heer et al. 2023).
To combat the effects of recent high inflation on income, Austria – like several other countries, such as Germany, Portugal, and Poland – has implemented significant ad hoc payments for pensioners.
Given these figures, it is not surprising that Austria ranked conspicuously low in the 2023 Mercer report on the overall quality of its pension system, receiving an overall score of “C” on a scale from A to D (ranked 40 out of 47 countries). While Austrian pensions generally aim to prevent old-age poverty, the report suggested measures such as increasing the minimum level of support for the poorest elderly individuals and introducing arrangements to protect the pension interests of both parties in a divorce. As in most countries, women tend to receive significantly lower pensions. However, the key problem with the Austrian pension system has been identified as its tremendous costs and effective unsustainability (see also P14.2).
Citations:
https://www.mercer.com/assets/global/en/shared-assets/global/attachments/pdf-2023-mercer-cfa-global-pension-index-full-report-11-09-2023.pdf
https://www.merkur.de/wirtschaft/rentensystem-vorteile-nachteile-faktencheck-rente-deutschland-oesterreich-vergleich-zr-92647602.html
https://www.merkur.de/wirtschaft/alter-altersarmut-wirtschaft-rente-deutschland-oesterreich-rentensystem-rentenbezuege-zr-92281223.html
Heer, B., V. Polito, and M. R. Wickens. 2023. “Pension system (un)sustainability and fiscal constraints: A comparative analysis.” CEPR Discussion Paper DP18181.
https://www.kleinezeitung.at/home/17746326/jeder-vierte-pensions-euro-fliesst-in-die-pensionen
Austrian Parliament. 2022. “Parliamentary Correspondence No. 1262 Dating 11.10.2022.” parlament.gv.at
https://www.mercer.com/assets/global/en/shared-assets/global/attachments/pdf-2023-mercer-cfa-global-pension-index-full-report-11-09-2023.pdf
https://www.merkur.de/wirtschaft/rentensystem-vorteile-nachteile-faktencheck-rente-deutschland-oesterreich-vergleich-zr-92647602.html
https://www.merkur.de/wirtschaft/alter-altersarmut-wirtschaft-rente-deutschland-oesterreich-rentensystem-rentenbezuege-zr-92281223.html
Heer, B., V. Polito, and M. R. Wickens. 2023. “Pension system (un)sustainability and fiscal constraints: A comparative analysis.” CEPR Discussion Paper DP18181.
https://www.kleinezeitung.at/home/17746326/jeder-vierte-pensions-euro-fliesst-in-die-pensionen
Austrian Parliament. 2022. “Parliamentary Correspondence No. 1262 Dating 11.10.2022.” parlament.gv.at
Czechia
The Czech pension system has developed through gradual and partial reform of the pay-as-you-go system that existed before 1989. Its centerpiece is a mandatory public pension insurance scheme, administered by the Czech Social Security Administration (Česká správa sociálního zabezpečení, ČSSZ). Income and spending have been roughly in balance over the years, sometimes with a small surplus and sometimes – as in 2022 – with a small deficit. In addition, there are supplementary pension savings schemes supported by the state in the form of contributions and tax relief.
The official minimum retirement age, which has gradually increased since 1996, differs for men and women. For women, this age depends on the number of children reared. In 2017, the maximum retirement age for both sexes was set at 65 years. Since the late 1990s, there have been efforts to prepare and adopt significant pension reforms, including a division into a basic pension plus a voluntary additional pension that could be administered by private funds. These changes have never won the political consensus necessary to ensure permanence.
The main change in practice has been the periodic increase in the pension age, which has lagged slightly behind the increase in life expectancy. From 1993 to 2022, male life expectancy increased by 6.4 years while the pension age increased by 5 years. Meanwhile, the level of state pension fell from the equivalent of 49% of average earnings to 42% (45% for men and 37% for women), with 31% reported as facing foreclosure proceedings to reclaim unpaid debts. This does not indicate an imminent threat to the system’s sustainability, assuming gradual increases in the pension age continue in the future.
Price increases in 2022 and 2023 significantly impacted pensioners in Czechia. The government responded with an extraordinary indexation of pensions. However, in early 2023, it proposed – and in July implemented – a change to the indexation system. This adjustment meant the average pension would increase by only 4% instead of 9% in response to inflation, a move that was highly controversial.
The argument was that old-age pensioners were generally not living in poverty (the relative income poverty rate among people aged 66+ was below 6% in 2023), and pensions could reach nearly 50% of the average wage (presumably calculated with the assumption that average wages would not rise in 2023). Pensions were seen as becoming an immediate threat to the state’s financial stability. As a result, the measure was pushed through parliament as a special measure requiring only limited discussion.
A complaint regarding this and other procedural aspects was rejected by the Constitutional Court in January 2024, but more complaints could follow. Further changes to pensions included tightening eligibility for early retirement from five to three years before the statutory retirement age, effective October 2023. The length of pension insurance required to obtain an early retirement pension also increased to 40 years. While this may help increase the labor force, it will negatively impact those with shorter tenures in the labor market and those whose poor health hampers working into old age.
Proposals for a more substantial pension reform are promised for early 2024. A proposal has been put forward for discussion to introduce a more formal link between retirement ages and life expectancy.
The official minimum retirement age, which has gradually increased since 1996, differs for men and women. For women, this age depends on the number of children reared. In 2017, the maximum retirement age for both sexes was set at 65 years. Since the late 1990s, there have been efforts to prepare and adopt significant pension reforms, including a division into a basic pension plus a voluntary additional pension that could be administered by private funds. These changes have never won the political consensus necessary to ensure permanence.
The main change in practice has been the periodic increase in the pension age, which has lagged slightly behind the increase in life expectancy. From 1993 to 2022, male life expectancy increased by 6.4 years while the pension age increased by 5 years. Meanwhile, the level of state pension fell from the equivalent of 49% of average earnings to 42% (45% for men and 37% for women), with 31% reported as facing foreclosure proceedings to reclaim unpaid debts. This does not indicate an imminent threat to the system’s sustainability, assuming gradual increases in the pension age continue in the future.
Price increases in 2022 and 2023 significantly impacted pensioners in Czechia. The government responded with an extraordinary indexation of pensions. However, in early 2023, it proposed – and in July implemented – a change to the indexation system. This adjustment meant the average pension would increase by only 4% instead of 9% in response to inflation, a move that was highly controversial.
The argument was that old-age pensioners were generally not living in poverty (the relative income poverty rate among people aged 66+ was below 6% in 2023), and pensions could reach nearly 50% of the average wage (presumably calculated with the assumption that average wages would not rise in 2023). Pensions were seen as becoming an immediate threat to the state’s financial stability. As a result, the measure was pushed through parliament as a special measure requiring only limited discussion.
A complaint regarding this and other procedural aspects was rejected by the Constitutional Court in January 2024, but more complaints could follow. Further changes to pensions included tightening eligibility for early retirement from five to three years before the statutory retirement age, effective October 2023. The length of pension insurance required to obtain an early retirement pension also increased to 40 years. While this may help increase the labor force, it will negatively impact those with shorter tenures in the labor market and those whose poor health hampers working into old age.
Proposals for a more substantial pension reform are promised for early 2024. A proposal has been put forward for discussion to introduce a more formal link between retirement ages and life expectancy.
Citations:
Pensions at a Glance 2023. OECD and G20 Indicators, p. 37, https://www.oecd.org/publications/oecd-pensions-at-a-glance-19991363.htm
https://www.cssz.cz/documents/20143/99593/2022_zoc.pdf/26a54954-34ac-1ef6-5324-dcc2dc1edb9a
.cz/v-otazce-valorizace-penzi-zvolil-pavel-pristup-chytreho-horaka-je-adekvatni-8952381.
https://plus.rozhlas.cz/duchody-jsou-nejvyssi-v-historii-vyssi-valorizace-znamena-vazne-hospodarske-8942481
https://www.usoud.cz/fileadmin/user_upload/Tiskova_mluvci/Publikovane_nalezy/2024/Pl-30-23-valorizace_duchodu.pdf
Pensions at a Glance 2023. OECD and G20 Indicators, p. 37, https://www.oecd.org/publications/oecd-pensions-at-a-glance-19991363.htm
https://www.cssz.cz/documents/20143/99593/2022_zoc.pdf/26a54954-34ac-1ef6-5324-dcc2dc1edb9a
.cz/v-otazce-valorizace-penzi-zvolil-pavel-pristup-chytreho-horaka-je-adekvatni-8952381.
https://plus.rozhlas.cz/duchody-jsou-nejvyssi-v-historii-vyssi-valorizace-znamena-vazne-hospodarske-8942481
https://www.usoud.cz/fileadmin/user_upload/Tiskova_mluvci/Publikovane_nalezy/2024/Pl-30-23-valorizace_duchodu.pdf
France
The French pension system is relatively generous and largely prevents poverty among the elderly. Public expenditure on pensions as a share of GDP is high. It reached 14.7% in 2020 – a peak due to the pandemic – but is expected to decrease and stabilize at a level of 13.7% by 2030. The 2023 pensions reform ended four special schemes outside the general regime (reserved for specific professions) with the aim of enhancing pension system equality, although this will apply only to future beneficiaries. Another highly contested part of the reform affected the pension age for virtually everyone. To prevent future financial deficits, the minimum age of pension eligibility was increased from 62 to 64. In line with this, the number of contributing years necessary to benefit from a full pension was increased. The reform also – very slightly – increased small pensions as a means of reducing old-age poverty, but the effects of this portion of the reform are disputed.
The heated debate about the benefits of the recent pension system reform has focused particularly on the necessity of the reform. There is now consensus that the persistent deficit will not be resolved by the reform, but that this deficit is viable in the medium term (Bozio 2022).
Individuals in nonstandard employment or with interrupted employment biographies sometimes face significant disadvantages regarding their pension income. For instance, the pension of independent (self-employed) workers is on average more than 30% lower than that of conventionally employed workers (OECD 2022). A study by the national statistics institute INSEE found that 16% of individuals between the ages of 55 and 69 did not have either a pension or work income in 2021 (INSEE 2023). There are specific compensation mechanisms for individuals who have had a full employment career but with low wages, for example, to guarantee a minimum pension of €961 (Paribas 2024).
For people with interrupted employment biographies, the situation differs according to the specific cases (for instance, due to the reasons for and duration of unemployment). However, the state does offer solidarity mechanisms compensating for the loss of pension rights, for instance for people who have experienced a period of unemployment lasting at least five years (COR 2023: 221ff, 235 ff).
One major challenge associated with the reform bill is the need to increase the employment rate among older workers. The employment rate among those 55 years and older is about 10 percentage points lower than the OECD average. The reform has thus created a major source of economic uncertainty for older workers. Part of the problem is that change has to come from the workfare policies relating to older workers at companies. To facilitate a solution, the government initiated a round of negotiations between employers’ organizations and trade unions at the end of 2023. Results are not expected before mid-2024.
The heated debate about the benefits of the recent pension system reform has focused particularly on the necessity of the reform. There is now consensus that the persistent deficit will not be resolved by the reform, but that this deficit is viable in the medium term (Bozio 2022).
Individuals in nonstandard employment or with interrupted employment biographies sometimes face significant disadvantages regarding their pension income. For instance, the pension of independent (self-employed) workers is on average more than 30% lower than that of conventionally employed workers (OECD 2022). A study by the national statistics institute INSEE found that 16% of individuals between the ages of 55 and 69 did not have either a pension or work income in 2021 (INSEE 2023). There are specific compensation mechanisms for individuals who have had a full employment career but with low wages, for example, to guarantee a minimum pension of €961 (Paribas 2024).
For people with interrupted employment biographies, the situation differs according to the specific cases (for instance, due to the reasons for and duration of unemployment). However, the state does offer solidarity mechanisms compensating for the loss of pension rights, for instance for people who have experienced a period of unemployment lasting at least five years (COR 2023: 221ff, 235 ff).
One major challenge associated with the reform bill is the need to increase the employment rate among older workers. The employment rate among those 55 years and older is about 10 percentage points lower than the OECD average. The reform has thus created a major source of economic uncertainty for older workers. Part of the problem is that change has to come from the workfare policies relating to older workers at companies. To facilitate a solution, the government initiated a round of negotiations between employers’ organizations and trade unions at the end of 2023. Results are not expected before mid-2024.
Citations:
Antonio Bozio. 2022. “Le système de retraite français est-il en péril?” Blog IPP. https://blog.ipp.eu/2022/12/07/le-systeme-de-retraite-francais-est-il-en-peril/
Paribas. 2024. “Le ‘minimum vieillesse ou Aspa.’“ 7 March. Retrieved 12 March 2024 from https://www.la-retraite-en-clair.fr/depart-retraite-age-montant/montants-minimums-retraite/minimum-vieillesse-aspa
COR. 2023. “Comité d’orientation des retraites, Évolutions et perspectives des retraites en France. Rapport annuel, Juin 2023.” Retrieved 12 March 2024 from https://www.cor-retraites.fr/sites/default/files/2023-06/RA_2023.pdf
INSEE. 2023. “En 2021, une personne de 55 à 69 ans sur six ni en emploi ni en retraite, une situation le plus souvent subie.” https://www.insee.fr/fr/statistiques/7617420
OECD. 2022. “Formes d’emploi atypiques et pensions.” Retrieved 11 March 2024 from https://www.oecd-ilibrary.org/sites/43fe47c5-fr/index.html?itemId=/content/component/43fe47c5-fr
Antonio Bozio. 2022. “Le système de retraite français est-il en péril?” Blog IPP. https://blog.ipp.eu/2022/12/07/le-systeme-de-retraite-francais-est-il-en-peril/
Paribas. 2024. “Le ‘minimum vieillesse ou Aspa.’“ 7 March. Retrieved 12 March 2024 from https://www.la-retraite-en-clair.fr/depart-retraite-age-montant/montants-minimums-retraite/minimum-vieillesse-aspa
COR. 2023. “Comité d’orientation des retraites, Évolutions et perspectives des retraites en France. Rapport annuel, Juin 2023.” Retrieved 12 March 2024 from https://www.cor-retraites.fr/sites/default/files/2023-06/RA_2023.pdf
INSEE. 2023. “En 2021, une personne de 55 à 69 ans sur six ni en emploi ni en retraite, une situation le plus souvent subie.” https://www.insee.fr/fr/statistiques/7617420
OECD. 2022. “Formes d’emploi atypiques et pensions.” Retrieved 11 March 2024 from https://www.oecd-ilibrary.org/sites/43fe47c5-fr/index.html?itemId=/content/component/43fe47c5-fr
New Zealand
The state pension system, New Zealand Superannuation (NZ Super), plays a significant role in preventing poverty among senior citizens. Unlike some contribution-based pension systems, NZ Super is universal, providing the same pension amount regardless of an individual’s employment history. This benefits those with interrupted employment or nonstandard work, as they can still receive the pension without meeting specific contribution criteria. NZ Super is linked to the average wage, ensuring that it keeps pace with changes in the cost of living.
The government also provides tax credits to incentivize individuals to contribute portions of their salary or wages to KiwiSaver – a voluntary scheme designed to build long-term savings. KiwiSaver funds are invested in various types of assets, depending on the member’s chosen fund or scheme, and can generally be accessed upon retirement, purchasing a first home, or under certain financial hardship conditions.
For seniors who may require additional financial assistance, supplementary income support programs are available, such as the Accommodation Supplement. Seniors also have access to initiatives like the SuperGold Card, which provides discounts on healthcare services, public transport and other essentials.
New Zealand’s pension regime is relatively efficient: Just 7.7% of those between 65 and 75 are considered to be living in poverty, compared to the OECD average of 11.6% – even though the figure rises to 15.2% for those 76 and older (16.2% across the OECD) (OECD 2021). Nevertheless, potential areas for improvement exist. In particular, the recent cost of living and rent spikes are eating into seniors’ incomes – a situation that is especially difficult for pensioners who have no other incomes besides Super NZ (Hendry-Tennent 2023).
Moreover, evidence suggests that women tend to have lower long-term savings available at retirement due to labor market breaks, unpaid care work and a tendency to be more conservative with investments. This phenomenon has become known as the gender pension gap (RNZ 2023).
The government also provides tax credits to incentivize individuals to contribute portions of their salary or wages to KiwiSaver – a voluntary scheme designed to build long-term savings. KiwiSaver funds are invested in various types of assets, depending on the member’s chosen fund or scheme, and can generally be accessed upon retirement, purchasing a first home, or under certain financial hardship conditions.
For seniors who may require additional financial assistance, supplementary income support programs are available, such as the Accommodation Supplement. Seniors also have access to initiatives like the SuperGold Card, which provides discounts on healthcare services, public transport and other essentials.
New Zealand’s pension regime is relatively efficient: Just 7.7% of those between 65 and 75 are considered to be living in poverty, compared to the OECD average of 11.6% – even though the figure rises to 15.2% for those 76 and older (16.2% across the OECD) (OECD 2021). Nevertheless, potential areas for improvement exist. In particular, the recent cost of living and rent spikes are eating into seniors’ incomes – a situation that is especially difficult for pensioners who have no other incomes besides Super NZ (Hendry-Tennent 2023).
Moreover, evidence suggests that women tend to have lower long-term savings available at retirement due to labor market breaks, unpaid care work and a tendency to be more conservative with investments. This phenomenon has become known as the gender pension gap (RNZ 2023).
Citations:
Hendry-Tennent, I. 2023. “Cost of living: Pensioners living in pain, skipping meals as inflation pushes essentials out of reach.” Newshub, April 8. https://www.newshub.co.nz/home/money/2023/04/cost-of-living-pensioners-living-in-pain-skipping-meals-as-inflation-pushes-essentials-out-of-reach.html
OECD. 2021. “Old Age Income Poverty.” https://www.oecd-ilibrary.org/sites/d76e4fad-en/index.html?itemId=/content/component/d76e4fad-en
RNZ. 2023. “Gender gap for Kiwisaver balances worsens.” Radio New Zealand, July 11. https://www.rnz.co.nz/news/business/493534/gender-gap-for-kiwisaver-balances-worsens-trend-more-apparent-in-younger-age-groups
Hendry-Tennent, I. 2023. “Cost of living: Pensioners living in pain, skipping meals as inflation pushes essentials out of reach.” Newshub, April 8. https://www.newshub.co.nz/home/money/2023/04/cost-of-living-pensioners-living-in-pain-skipping-meals-as-inflation-pushes-essentials-out-of-reach.html
OECD. 2021. “Old Age Income Poverty.” https://www.oecd-ilibrary.org/sites/d76e4fad-en/index.html?itemId=/content/component/d76e4fad-en
RNZ. 2023. “Gender gap for Kiwisaver balances worsens.” Radio New Zealand, July 11. https://www.rnz.co.nz/news/business/493534/gender-gap-for-kiwisaver-balances-worsens-trend-more-apparent-in-younger-age-groups
Portugal
To address poverty among senior citizens, recent pension reforms in Portugal have introduced measures to ensure a basic level of financial security for new retirees. Eligible pensioners who have contributed to the mandatory social insurance scheme are guaranteed a minimum pension correlated with their career duration. This serves as a crucial safety net. Additionally, the Portuguese pension system aims to provide adequate income in old age for individuals with non-standard or interrupted employment histories through means-tested benefits. These benefits are a key component of the social security system’s solidarity subsystem. They represent the non-contributory segment designed to combat poverty and social exclusion, including among pensioners. These benefits cater to situations of verified need and aim to offset insufficiencies in contributions or other social security benefits.
Key examples of provisions for old-age income in Portugal include the old-age social pension and the solidarity supplement for the elderly. The old-age social pension is a non-contributory, means-tested pension designated for lower-income elderly individuals. It is available to those who reach the legal age for the old-age pension, are not eligible for the main benefit, and are in a state of economic need. However, the actual amount provided is small: €245.79 per month (Segurança Social, 2024). The solidarity supplement for the elderly is another non-contributory, means-tested benefit aimed at assisting pensioners with low incomes who have attained the legal retirement age. The value is €21.39 for pensioners aged below 70 and €42.78 for pensioners aged 70 or above (Segurança Social, 2024). Recipients of this supplement may also qualify for additional health benefits and extraordinary social support for energy consumers, such as subsidized electricity and natural gas tariffs. These measures collectively demonstrate Portugal’s commitment to supporting its elderly population, particularly those who are most vulnerable.
The social security pension system also aims to help all citizens meet their basic needs through the social integration income – a cash benefit ensuring individuals and their family members have adequate resources for basic needs, facilitating their gradual social and professional integration, if applicable.
While pension benefits have increased in recent years, particularly for lower-income pensioners, they still fall short in effectively preventing a high rate of poverty among senior citizens. The poverty rate among individuals aged over 65 was 17% in 2022 (PORDATA, 2023).
Key examples of provisions for old-age income in Portugal include the old-age social pension and the solidarity supplement for the elderly. The old-age social pension is a non-contributory, means-tested pension designated for lower-income elderly individuals. It is available to those who reach the legal age for the old-age pension, are not eligible for the main benefit, and are in a state of economic need. However, the actual amount provided is small: €245.79 per month (Segurança Social, 2024). The solidarity supplement for the elderly is another non-contributory, means-tested benefit aimed at assisting pensioners with low incomes who have attained the legal retirement age. The value is €21.39 for pensioners aged below 70 and €42.78 for pensioners aged 70 or above (Segurança Social, 2024). Recipients of this supplement may also qualify for additional health benefits and extraordinary social support for energy consumers, such as subsidized electricity and natural gas tariffs. These measures collectively demonstrate Portugal’s commitment to supporting its elderly population, particularly those who are most vulnerable.
The social security pension system also aims to help all citizens meet their basic needs through the social integration income – a cash benefit ensuring individuals and their family members have adequate resources for basic needs, facilitating their gradual social and professional integration, if applicable.
While pension benefits have increased in recent years, particularly for lower-income pensioners, they still fall short in effectively preventing a high rate of poverty among senior citizens. The poverty rate among individuals aged over 65 was 17% in 2022 (PORDATA, 2023).
Citations:
PORDATA. 2023. “Taxa de risco de pobreza por grupo etário: antes e após transferências sociais.”
https://www.pordata.pt/portugal/taxa+de+risco+de+pobreza+por+grupo+etario+antes+e+apos+transferencias+sociais-3009
Segurança Social, I.P. 2024. “Pensão Social de Velhice.” https://www.seg-social.pt/pensao-social-de-velhice1
PORDATA. 2023. “Taxa de risco de pobreza por grupo etário: antes e após transferências sociais.”
https://www.pordata.pt/portugal/taxa+de+risco+de+pobreza+por+grupo+etario+antes+e+apos+transferencias+sociais-3009
Segurança Social, I.P. 2024. “Pensão Social de Velhice.” https://www.seg-social.pt/pensao-social-de-velhice1
Slovenia
Certain population groups in Slovenia are still more at risk of poverty than the EU average, particularly single-person households, pensioners (including those aged 65 and over), and people with a low level of education. Besides adults with a low level of education, the unemployed, single-person households, people with various forms of disability, tenants, immigrants, and other vulnerable groups face heightened risks. Among these, pensioners, especially older women, have seen their living conditions deteriorate the most in recent years, and their situation remains worse than the EU average.
Due to rising inflation, pension organizations called for an extraordinary adjustment to pensions starting in early 2023. The government agreed to increase part of the benefits by 1.8% for the last two months of 2023, with a further 8.2% increase scheduled for January 2024. A regular pension adjustment will follow in February 2024, based on the increase in the average monthly gross wage (60%) and the average increase in consumer goods prices (40%). Additionally, in 2023, pensioners received a Christmas bonus for the first time. The bonus amount depends on the pensioner’s annual allowance, which is based on their pension.
Due to rising inflation, pension organizations called for an extraordinary adjustment to pensions starting in early 2023. The government agreed to increase part of the benefits by 1.8% for the last two months of 2023, with a further 8.2% increase scheduled for January 2024. A regular pension adjustment will follow in February 2024, based on the increase in the average monthly gross wage (60%) and the average increase in consumer goods prices (40%). Additionally, in 2023, pensioners received a Christmas bonus for the first time. The bonus amount depends on the pensioner’s annual allowance, which is based on their pension.
Citations:
V. L. 2023. “Za koliko bodo višje pokojnine: objavljamo izračun.” N1 26 November.
https://n1info.si/novice/slovenija/pokojnine-2024-uskladitev-povecanje-bozicnica/
UMAR. 2023. “Poročilo o razvoju 2023.” https://www.umar.gov.si/fileadmin/user_upload/razvoj_slovenije/2023/slovenski/POR2023-splet.pdf
V. L. 2023. “Za koliko bodo višje pokojnine: objavljamo izračun.” N1 26 November.
https://n1info.si/novice/slovenija/pokojnine-2024-uskladitev-povecanje-bozicnica/
UMAR. 2023. “Poročilo o razvoju 2023.” https://www.umar.gov.si/fileadmin/user_upload/razvoj_slovenije/2023/slovenski/POR2023-splet.pdf
Spain
Over the past years, there has been no shortage of warnings from within or outside Spain (e.g., the Bank of Spain, the EC, IMF and OECD) that the country’s pension system is heading toward a crisis. As part of the RRP, the EC requested a pension reform. In 2023 the government reached a pact with the opposition and social partners to safeguard the public pension system. The pension reform substantially increased basic pensions, minimum pensions and targeted benefits, as well as income protection for workers with irregular careers, including mothers. The reform particularly benefits retirees with low pensions.
Spanish pension policy successfully prevents poverty but only moderately meets standards of intergenerational equity and fiscal sustainability. Older people are less likely to be poor than the general population, with the old-age poverty rate (5% for men; 2% for women) being lower than that of the total population. Nonetheless, Spain ranks as the sixth OECD country in terms of income poverty among those aged over 65.
Spain removed automatic adjustment mechanisms, leading to a decline in pensions in real terms for several consecutive years. To address financial sustainability, including the low indexation of pensions in payment, Spain reintroduced price indexation, effective in 2022. Consequently, the recent pension reform will increase the net replacement rates for full-career workers. In 2023, the gender gap in pensions was reduced to 21.1%.
Spanish pension policy successfully prevents poverty but only moderately meets standards of intergenerational equity and fiscal sustainability. Older people are less likely to be poor than the general population, with the old-age poverty rate (5% for men; 2% for women) being lower than that of the total population. Nonetheless, Spain ranks as the sixth OECD country in terms of income poverty among those aged over 65.
Spain removed automatic adjustment mechanisms, leading to a decline in pensions in real terms for several consecutive years. To address financial sustainability, including the low indexation of pensions in payment, Spain reintroduced price indexation, effective in 2022. Consequently, the recent pension reform will increase the net replacement rates for full-career workers. In 2023, the gender gap in pensions was reduced to 21.1%.
Citations:
OECD. 2023. “Pensions at a Glance 2023.” https://www.oecd.org/els/public-pensions/PAG2023-country-profile-Spain.pdf
OECD. 2023. “Pensions at a Glance 2023.” https://www.oecd.org/els/public-pensions/PAG2023-country-profile-Spain.pdf
Netherlands
In 2022 and 2023, after more than 100 hours of technical debates and an unusual roll-call vote, the Dutch parliament approved a historic transition in the national pension system. The shift moves from a collectivist system of defined, guaranteed benefits to a more individualized system of well-defined arrangements for pension contributions with less certain but potentially higher personal benefits. This change requires the government and pension funds to undertake the unprecedented task of converting the collective pension pot of €1.4 trillion into millions of individual pots. The law has three goals: creating a supplementary pension that increases more quickly, securing a clearer and more personalized pension accrual function, and creating a system that better reflects a modern employment landscape in which people no longer work for the same employer for 40 years. The pension reform aims to make the system more sustainable for the future.
Will the new system prevent more old-age poverty? In the long run, perhaps; in the short run, this is not likely. For individuals in nonstandard employment and those with interrupted employment histories, the new system is an improvement, but its impacts will become evident only over the long term (more than 20 years). Currently, and under the new system, the self-employed are not mandatorily covered by the earnings-related scheme. According to a 2017 CBS survey, many self-employed individuals cannot afford private compensatory arrangements.
In the Netherlands, among adults aged 65 to 80, 2% to 3% live below the poverty line. This figure rises to 4% to 6% among the elderly aged 80 to 89, and more than one in 10 (11%) of those over 90 are poor. Although the income position of those over 65 is good on average, poverty is common among older people who have not accrued full state pension entitlements. This situation can arise if they were abroad for a period or came to the country later in life as migrants. Additionally, older people with high healthcare costs that leave them without enough money for basic needs experience poverty. They can apply for a means-tested social municipal arrangement to bring their income to the legally guaranteed minimum level. However, for various reasons, not everyone eligible for this arrangement utilizes it.
The most disadvantaged group remains older people with a migrant background. Among pensioners with a migration background, 6% live below the poverty line, compared to only 2.5% among retired native Dutch people. Pensioners with a migration background lag behind on several fronts: they have lower accrual of state pension rights, less supplementary pension provision and lower rates of homeownership. Frequently, they are reluctant to use the supplementary income provision because it does not allow them to own property in their countries of origin, or to freely travel between the Netherlands and their home countries.
Will the new system prevent more old-age poverty? In the long run, perhaps; in the short run, this is not likely. For individuals in nonstandard employment and those with interrupted employment histories, the new system is an improvement, but its impacts will become evident only over the long term (more than 20 years). Currently, and under the new system, the self-employed are not mandatorily covered by the earnings-related scheme. According to a 2017 CBS survey, many self-employed individuals cannot afford private compensatory arrangements.
In the Netherlands, among adults aged 65 to 80, 2% to 3% live below the poverty line. This figure rises to 4% to 6% among the elderly aged 80 to 89, and more than one in 10 (11%) of those over 90 are poor. Although the income position of those over 65 is good on average, poverty is common among older people who have not accrued full state pension entitlements. This situation can arise if they were abroad for a period or came to the country later in life as migrants. Additionally, older people with high healthcare costs that leave them without enough money for basic needs experience poverty. They can apply for a means-tested social municipal arrangement to bring their income to the legally guaranteed minimum level. However, for various reasons, not everyone eligible for this arrangement utilizes it.
The most disadvantaged group remains older people with a migrant background. Among pensioners with a migration background, 6% live below the poverty line, compared to only 2.5% among retired native Dutch people. Pensioners with a migration background lag behind on several fronts: they have lower accrual of state pension rights, less supplementary pension provision and lower rates of homeownership. Frequently, they are reluctant to use the supplementary income provision because it does not allow them to own property in their countries of origin, or to freely travel between the Netherlands and their home countries.
Citations:
Eerste Kamer. 2023. “Eerste Kamer stemt in met pensioenwet.” eerstekamer.nl, consulted January 14, 2024
Rijksoverheid. 2023. “Wet toekomst pensioenen aangenomen. Overgang naar nieuw pensioenstelsel start op 1 juli 2023.” rijksoverheid.nl.
NRC. 2022. “Een miljardenoperatie met de pensioenen - waar is dat voor nodig?” NRC Pelgrim March 30.
FTM, Rouffaer. 2023. “Nieuwe pensioenwet opent de weg naar juridisch wapengekletter.” 7 January.
OECD. 2023. Pensions at a Glance. The Netherlands.
de Kater, Binnenlands Bestuur. 2019. “Aantal Armen Neemt Af, Wel Uitschieters, Gebaseerd op SCP.” 3 Sep.
NIDI, Lössbroek, and Fokertsma. 2022. “Waar komt armoede onder gepensioneerde migranten vandaan?” December 9.
Eerste Kamer. 2023. “Eerste Kamer stemt in met pensioenwet.” eerstekamer.nl, consulted January 14, 2024
Rijksoverheid. 2023. “Wet toekomst pensioenen aangenomen. Overgang naar nieuw pensioenstelsel start op 1 juli 2023.” rijksoverheid.nl.
NRC. 2022. “Een miljardenoperatie met de pensioenen - waar is dat voor nodig?” NRC Pelgrim March 30.
FTM, Rouffaer. 2023. “Nieuwe pensioenwet opent de weg naar juridisch wapengekletter.” 7 January.
OECD. 2023. Pensions at a Glance. The Netherlands.
de Kater, Binnenlands Bestuur. 2019. “Aantal Armen Neemt Af, Wel Uitschieters, Gebaseerd op SCP.” 3 Sep.
NIDI, Lössbroek, and Fokertsma. 2022. “Waar komt armoede onder gepensioneerde migranten vandaan?” December 9.
UK
The United Kingdom has a three-pillar pension system, with the second pillar (employer-based pensions) being the mainstay. Private pension funds were adversely affected by the financial crisis as investment yields fell, leading some to require capital injections from employers. However, this has not significantly affected the incomes of those already retired. New entrants into second-pillar pension schemes are often offered less attractive terms than their predecessors. Successive pensions acts since 2016 have increased the state pension age to 66 for both men and women as of April 2021. Previously, the age was 60 for women and 65 for men, and the rapid increase for women led to complaints about inequities for those on certain age-cohort boundaries. The age will rise again in 2026 to 67.
The “new state pension,” introduced in 2016, offers a higher rate than the “basic pension” for men born after April 6, 1951, and women born after April 6, 1953, with different requirements for national insurance contributions. For the basic pension, eligibility was based on one year of contributions for those born between 1945 and 1951, but 11 years for men and 10 for women if born earlier. Those on the basic pension are eligible for the “additional state pension” and certain other financial supports.
Compared to many other countries, the UK state pension system is fiscally sustainable and guarantees a minimum income for pensioners through a “triple lock,” which raises the basic state pension by the highest of inflation, average wages, or 2% per annum. Successive governments have pledged to maintain this policy, despite criticism about the growing burden on younger generations. However, faced with an exceptional increase in average earnings in 2021 due to a statistical quirk, the government suspended the triple lock for one year, resulting in a lower nominal increase of 3.1%. This decision provoked an outcry, especially from government supporters who saw it as breaking a manifesto commitment.
The UK used to have a relatively high degree of poverty among the elderly compared to other European countries. Older people without earnings-related pensions still face a higher risk of poverty. This situation has improved as pension provision has expanded, more pensioners own mortgage-free properties, and specific additional payments, such as winter heating allowances, have been introduced.
Despite overall improvements, there are inequalities among groups of pensioners. Lifelong housewives, for example, fare worse than those who can add occupational or private pensions to their state pension income. Inadequacies in publicly funded care home provision for the elderly can also cause difficulties due to the high cost of private care homes, sometimes obliging families to draw down assets. Most pensioners, however, are on reasonably comfortable incomes. Recent debates have focused on cutting some fringe benefits for better-off pensioners, such as free bus travel, due to concerns about the burden on younger generations.
The “new state pension,” introduced in 2016, offers a higher rate than the “basic pension” for men born after April 6, 1951, and women born after April 6, 1953, with different requirements for national insurance contributions. For the basic pension, eligibility was based on one year of contributions for those born between 1945 and 1951, but 11 years for men and 10 for women if born earlier. Those on the basic pension are eligible for the “additional state pension” and certain other financial supports.
Compared to many other countries, the UK state pension system is fiscally sustainable and guarantees a minimum income for pensioners through a “triple lock,” which raises the basic state pension by the highest of inflation, average wages, or 2% per annum. Successive governments have pledged to maintain this policy, despite criticism about the growing burden on younger generations. However, faced with an exceptional increase in average earnings in 2021 due to a statistical quirk, the government suspended the triple lock for one year, resulting in a lower nominal increase of 3.1%. This decision provoked an outcry, especially from government supporters who saw it as breaking a manifesto commitment.
The UK used to have a relatively high degree of poverty among the elderly compared to other European countries. Older people without earnings-related pensions still face a higher risk of poverty. This situation has improved as pension provision has expanded, more pensioners own mortgage-free properties, and specific additional payments, such as winter heating allowances, have been introduced.
Despite overall improvements, there are inequalities among groups of pensioners. Lifelong housewives, for example, fare worse than those who can add occupational or private pensions to their state pension income. Inadequacies in publicly funded care home provision for the elderly can also cause difficulties due to the high cost of private care homes, sometimes obliging families to draw down assets. Most pensioners, however, are on reasonably comfortable incomes. Recent debates have focused on cutting some fringe benefits for better-off pensioners, such as free bus travel, due to concerns about the burden on younger generations.
6
Greece
Greece ranks at the bottom of EU countries for employment among older people, particularly those aged 55–64 (Eurostat 2022a). However, the country is average among EU nations regarding the poverty rate of senior citizens (Eurostat 2022b) and their likelihood of experiencing social exclusion (Eurostat 2022c).
This relative stability is primarily due to Greece’s provision of a minimum pension to all pensioners, regardless of their employment history. This minimum pension is supplemented by a pension linked to their lifetime insurance contributions, ensuring a basic level of income security. For some categories of pensioners, such as former civil servants and banking employees, pensions – including both main and supplementary pensions – can be quite substantial, depending on their past contributions.
Greece’s pension expenditure is 16% of GDP, the highest among OECD countries (OECD 2021). This raises concerns about the sustainability of the system, as the government may struggle to maintain pension programs at their current levels and scope in the long term.
This relative stability is primarily due to Greece’s provision of a minimum pension to all pensioners, regardless of their employment history. This minimum pension is supplemented by a pension linked to their lifetime insurance contributions, ensuring a basic level of income security. For some categories of pensioners, such as former civil servants and banking employees, pensions – including both main and supplementary pensions – can be quite substantial, depending on their past contributions.
Greece’s pension expenditure is 16% of GDP, the highest among OECD countries (OECD 2021). This raises concerns about the sustainability of the system, as the government may struggle to maintain pension programs at their current levels and scope in the long term.
Citations:
Eurostat. 2022. “Employment rates by sex, age and country of birth (%).” https://ec.europa.eu/eurostat/databrowser/view/LFSA_ERGACOB/default/table?lang=en
Eurostat. 2022. “At-risk-of-poverty Rate by Poverty Threshold, Age and Sex – EU-SILC and ECHP Surveys.”
https://ec.europa.eu/eurostat/databrowser/view/ILC_LI02/default/table?lang=en
Eurostat. 2022c. “People at Risk of Poverty and Social Exclusion by Age and Sex.”
https://ec.europa.eu/eurostat/databrowser/view/ILC_PEPS01N/default/table?lang=en
OECD. 2021. “Pensions at Glance 2021 – Public Expenditure on Pensions.” https://www.oecd-ilibrary.org/finance-and-investment/pensions-at-a-glance-2021_0cb13e61-en#:~:text=Greece%20and%20Italy%20spent%20the,%25%E2%80%9114%25%20of%20GDP
OECD. 2023. “OECD Pensions at a Glance, Country Profile – Greece.” https://www.oecd.org/els/public-pensions/PAG2023-country-profile-Greece.pdf
Eurostat. 2022. “Employment rates by sex, age and country of birth (%).” https://ec.europa.eu/eurostat/databrowser/view/LFSA_ERGACOB/default/table?lang=en
Eurostat. 2022. “At-risk-of-poverty Rate by Poverty Threshold, Age and Sex – EU-SILC and ECHP Surveys.”
https://ec.europa.eu/eurostat/databrowser/view/ILC_LI02/default/table?lang=en
Eurostat. 2022c. “People at Risk of Poverty and Social Exclusion by Age and Sex.”
https://ec.europa.eu/eurostat/databrowser/view/ILC_PEPS01N/default/table?lang=en
OECD. 2021. “Pensions at Glance 2021 – Public Expenditure on Pensions.” https://www.oecd-ilibrary.org/finance-and-investment/pensions-at-a-glance-2021_0cb13e61-en#:~:text=Greece%20and%20Italy%20spent%20the,%25%E2%80%9114%25%20of%20GDP
OECD. 2023. “OECD Pensions at a Glance, Country Profile – Greece.” https://www.oecd.org/els/public-pensions/PAG2023-country-profile-Greece.pdf
Ireland
The family means-testing system in Ireland is onerous. Many families fail to pass the full test, and the rules do not promote shared responsibility within households, leaving care primarily a gendered phenomenon and locking many women out of paid employment, which leads to pension gaps.
The central statistics office found that cost-of-living increases marginally disproportionately negatively impact older households. The number of people aged 65 and older living below the poverty line in 2022 increased by 55,000 compared to the previous year, with evidence of increased vulnerability, including more older people using emergency homeless accommodation. Social welfare payments require uplifts of €25 per week to lift people out of poverty. The 2022 Pensions Commission examined sustainability and eligibility issues in state pensions (one-third of average earnings), recommending further examination of adequacy and benchmarking.
The state pension system does not necessarily ensure an adequate old-age income for individuals in non-standard employment or with interrupted employment biographies (e.g., low-skilled, self-employed individuals, long-term unemployed, single parents, chronically ill individuals, or those with a migration background). Means-tested state payments force people to deplete their assets, leaving them vulnerable in old age. Positively, the Commission recommended a 20-year care credit, now operational from January 2024, which is valuable to women seeking access to fuller contributory pensions.
Health and housing needs are particularly lacking, with an urgent need for a home care policy to reduce reliance on expensive institutional care in usually private nursing homes. Housing is also a basic need that is inadequately addressed. Eurostat finds that 13.1% of Ireland’s population aged 65 and older live in inadequate, inappropriate dwellings, with 3,000 older adults lacking their own indoor flushing toilets for the sole use of their household. There have been severe cuts in Housing Aid for Older People and for People with a Disability. Twenty-five percent of older people expect to continue renting into older age, causing high stress.
The central statistics office found that cost-of-living increases marginally disproportionately negatively impact older households. The number of people aged 65 and older living below the poverty line in 2022 increased by 55,000 compared to the previous year, with evidence of increased vulnerability, including more older people using emergency homeless accommodation. Social welfare payments require uplifts of €25 per week to lift people out of poverty. The 2022 Pensions Commission examined sustainability and eligibility issues in state pensions (one-third of average earnings), recommending further examination of adequacy and benchmarking.
The state pension system does not necessarily ensure an adequate old-age income for individuals in non-standard employment or with interrupted employment biographies (e.g., low-skilled, self-employed individuals, long-term unemployed, single parents, chronically ill individuals, or those with a migration background). Means-tested state payments force people to deplete their assets, leaving them vulnerable in old age. Positively, the Commission recommended a 20-year care credit, now operational from January 2024, which is valuable to women seeking access to fuller contributory pensions.
Health and housing needs are particularly lacking, with an urgent need for a home care policy to reduce reliance on expensive institutional care in usually private nursing homes. Housing is also a basic need that is inadequately addressed. Eurostat finds that 13.1% of Ireland’s population aged 65 and older live in inadequate, inappropriate dwellings, with 3,000 older adults lacking their own indoor flushing toilets for the sole use of their household. There have been severe cuts in Housing Aid for Older People and for People with a Disability. Twenty-five percent of older people expect to continue renting into older age, causing high stress.
Citations:
Department of Social Protection (DSP). 2021. “Report of the Commission on Pensions.” https://www.gov.ie/en/publication/6cb6d-report-of-the-commission-on-pensions/
Department of Social Protection (DSP). 2021. “Report of the Commission on Pensions.” https://www.gov.ie/en/publication/6cb6d-report-of-the-commission-on-pensions/
Latvia
The average pension payment increased consistently each year from 2018 to 2022. Starting at 313.75 euros in 2018, it rose steadily to 449.88 euros by 2022. Pensioners accounted for the most significant portion of social protection spending at 41%, with 88.3% allocated to old-age pensions, amounting to €2.46 billion. In 2022, total social protection outlays for “old age” rose by 10.5% compared to 2021, primarily due to pension indexation (Centrālā Statistikas Pārvalde, 2023).
Among residents aged 65 and older, 19.1% were susceptible to material and social deprivation, an increase of 5.8 percentage points since 2021, and 10.5% were subject to severe material and social deprivation, rising by 4.8 percentage points. In 2022, men in Latvia were expected to live an average of 14 years after retirement, and women 19 years (Centrālā Statistikas Pārvalde, 2023b).
Equal pay for work ensures the potential for equal pensions upon retirement. However, due to gender pay disparities, pension amounts differ for women and men. In 2022, men’s average old-age pension payments were 11.3% higher than women’s; men received €481.96, while women received €433.22.
Pension supplements will be restored. This decision was made in conjunction with the 2024 budget. To boost income and enhance state financial support for one of the more vulnerable groups – older people – an additional payment for insurance periods accrued until December 31, 1995, will be progressively restored to age and disability pensions granted from 2012 to 2028, starting from 2024 to 2029. Beginning in 2029, this supplement will be paid to all recipients of age and disability pensions. This change will impact 38,000 people in 2024, 87,000 in 2025, and 144,000 by 2026 (LV Portāls, 2023).
Among residents aged 65 and older, 19.1% were susceptible to material and social deprivation, an increase of 5.8 percentage points since 2021, and 10.5% were subject to severe material and social deprivation, rising by 4.8 percentage points. In 2022, men in Latvia were expected to live an average of 14 years after retirement, and women 19 years (Centrālā Statistikas Pārvalde, 2023b).
Equal pay for work ensures the potential for equal pensions upon retirement. However, due to gender pay disparities, pension amounts differ for women and men. In 2022, men’s average old-age pension payments were 11.3% higher than women’s; men received €481.96, while women received €433.22.
Pension supplements will be restored. This decision was made in conjunction with the 2024 budget. To boost income and enhance state financial support for one of the more vulnerable groups – older people – an additional payment for insurance periods accrued until December 31, 1995, will be progressively restored to age and disability pensions granted from 2012 to 2028, starting from 2024 to 2029. Beginning in 2029, this supplement will be paid to all recipients of age and disability pensions. This change will impact 38,000 people in 2024, 87,000 in 2025, and 144,000 by 2026 (LV Portāls, 2023).
Citations:
Centrālā statistikas pārvalde. 2024. “Pensiju statistika.” https://data.stat.gov.lv:443/api/v1/lv/OSP_PUB/START/VES/PP/PPP/PPP020
Centrālā statistikas pārvalde. 2023a. “Sociālās aizsardzības un veselības preses relīzes.” https://stat.gov.lv/lv/statistikas-temas/soc-aizsardziba-veseliba/pensijas-pabalsti/preses-relizes/14367-socialas?themeCode=PP
Centrālā statistikas pārvalde. 2023b. “Materiālā nenodrošinātība Latvijā 2022.” https://admin.stat.gov.lv/system/files/publication/2023-03/Nr_06_Materiala_nenodrosinatiba_Latvija_2022_%2823_00%29_LV.pdf
Centrālā statistikas pārvalde. 2023. “Iedzīvotāju skaits un statistika.” https://stat.gov.lv/lv/statistikas-temas/iedzivotaji/iedzivotaju-skaits/preses-relizes/19617-csp-precize-virietis-pensija
Centrālā statistikas pārvalde. 2023. “Dzimumu līdztiesība 2023.” https://admin.stat.gov.lv/system/files/publication/2023-12/Dzimumu_lidztiesiba_%2823_00%29_LV.pdf
LV portāls. 2023. “Jautājumi un atbildes par piemaksas pie pensijas atjaunošanu.” https://lvportals.lv/skaidrojumi/358332-jautajumi-un-atbildes-par-piemaksas-pie-pensijas-atjaunosanu-2023
Centrālā statistikas pārvalde. 2024. “Pensiju statistika.” https://data.stat.gov.lv:443/api/v1/lv/OSP_PUB/START/VES/PP/PPP/PPP020
Centrālā statistikas pārvalde. 2023a. “Sociālās aizsardzības un veselības preses relīzes.” https://stat.gov.lv/lv/statistikas-temas/soc-aizsardziba-veseliba/pensijas-pabalsti/preses-relizes/14367-socialas?themeCode=PP
Centrālā statistikas pārvalde. 2023b. “Materiālā nenodrošinātība Latvijā 2022.” https://admin.stat.gov.lv/system/files/publication/2023-03/Nr_06_Materiala_nenodrosinatiba_Latvija_2022_%2823_00%29_LV.pdf
Centrālā statistikas pārvalde. 2023. “Iedzīvotāju skaits un statistika.” https://stat.gov.lv/lv/statistikas-temas/iedzivotaji/iedzivotaju-skaits/preses-relizes/19617-csp-precize-virietis-pensija
Centrālā statistikas pārvalde. 2023. “Dzimumu līdztiesība 2023.” https://admin.stat.gov.lv/system/files/publication/2023-12/Dzimumu_lidztiesiba_%2823_00%29_LV.pdf
LV portāls. 2023. “Jautājumi un atbildes par piemaksas pie pensijas atjaunošanu.” https://lvportals.lv/skaidrojumi/358332-jautajumi-un-atbildes-par-piemaksas-pie-pensijas-atjaunosanu-2023
Lithuania
Pension policies are largely aligned with the goal of preventing old-age poverty. According to the OECD, Lithuania’s senior citizen poverty rate has been among the OECD countries’ highest. Both previous and current governments have increased funding for old-age pensions and made some modifications to the three-pillar pension system, which mixes public and private programs.
The 2020 – 2024 coalition government increased pensions substantially – they grew by 17% on average in 2022 (an increase of 12% in January and another 5% in June). The average old-age pension, which stood at €255 in 2016, rose to €413 in 2021, to €482 in June 2022 and to €542 in 2023.
The government indexed old-age pensions in both 2022 and 2023. In Lithuania, pension indexation rules link pension increases to average increases in the wage fund. However, according to the OECD, these increases were not enough to compensate for high inflation rates, and in real terms, pensions were around 4% lower in January 2023 than in January 2022 (except for targeted benefits, which increased by almost 4% due to the importance of food prices in indexing targeted benefits). According to projections offered by the Ministry of Social Security and Labor, old-age average pensions are expected to increase faster than prices in 2024, and will reach €605.
The new government has introduced changes to the pension system. In particular, persons who have not accumulated the necessary work years will now receive a base pension rate. This change aims to prevent old-age poverty among individuals who have been in nonstandard employment or had interrupted employment histories. However, some analysts have expressed concerns about the increasing politicization of the issue and potential disincentive effects.
The 2020 – 2024 coalition government increased pensions substantially – they grew by 17% on average in 2022 (an increase of 12% in January and another 5% in June). The average old-age pension, which stood at €255 in 2016, rose to €413 in 2021, to €482 in June 2022 and to €542 in 2023.
The government indexed old-age pensions in both 2022 and 2023. In Lithuania, pension indexation rules link pension increases to average increases in the wage fund. However, according to the OECD, these increases were not enough to compensate for high inflation rates, and in real terms, pensions were around 4% lower in January 2023 than in January 2022 (except for targeted benefits, which increased by almost 4% due to the importance of food prices in indexing targeted benefits). According to projections offered by the Ministry of Social Security and Labor, old-age average pensions are expected to increase faster than prices in 2024, and will reach €605.
The new government has introduced changes to the pension system. In particular, persons who have not accumulated the necessary work years will now receive a base pension rate. This change aims to prevent old-age poverty among individuals who have been in nonstandard employment or had interrupted employment histories. However, some analysts have expressed concerns about the increasing politicization of the issue and potential disincentive effects.
Citations:
OECD. 2023. Pensions at a Glance 2023: OECD and G20 Indicators. Paris: OECD Publishing.
https://doi.org/10.1787/678055dd-en
Lithuanian Ministry of Social Security and Labor. “How shall we live in 2024.” https://socmin.lrv.lt/lt/naujienos/2024-metais-dides-dirbanciuju-pajamos-senjorai-sulauks-didesniu-pensiju-ugtels-ir-kitos-ismokos
OECD. 2023. Pensions at a Glance 2023: OECD and G20 Indicators. Paris: OECD Publishing.
https://doi.org/10.1787/678055dd-en
Lithuanian Ministry of Social Security and Labor. “How shall we live in 2024.” https://socmin.lrv.lt/lt/naujienos/2024-metais-dides-dirbanciuju-pajamos-senjorai-sulauks-didesniu-pensiju-ugtels-ir-kitos-ismokos
Switzerland
The Swiss pension system is based on three pillars, each with its own logic of financing and redistribution. The underlying concept is that pension income should not fall below the subsistence level and should provide 60% of average pre-retirement income. The first pillar guarantees a basic income. The minimum benefit level for a single person in 2023 was CHF 1,225 per month, while the maximum benefit was CHF 2,450 per month. The sum of the two individual pensions of a married couple may not exceed 150% of the maximum pension (i.e., CHF 3,675 per month). If this maximum amount is exceeded, the two individual pensions are reduced accordingly. Employers and employees finance this through contributions. It is a pay-as-you-go system and is highly redistributive, since the maximum benefit level for couples (provided to high-income earners) is just 1.5 times that of the minimum benefit level, while contributions are proportional to income. Every resident has to contribute to this first pillar.
The second pillar is a funded system financed through contributions by employers and employees. Contributions and benefits are proportional to income. Employees whose income from the first pillar already covers about 60% of their wage income are not entitled to this system. Many pension programs, particularly in the public sector, are very generous and provide pension incomes (first and second pillars combined) that exceed 60% of previous income. Historically, this system of occupational pensions is the core of the Swiss pension system, and powerful interests – especially major political parties and financial institutions – have allowed for only piecemeal reforms (Armingeon 2018; Leimgruber 2008).
The third pillar takes the form of personal tax-deductible savings of up to CHF 7,056 per year (2023). This system benefits high-income groups, since they can afford to put aside these sums and have the highest returns on these savings given the tax advantages.
In international comparison, the Swiss pension system performs extremely well. According to a comparative analysis of 24 countries, this system has one of the smallest pension gaps among developed democracies. A pension gap is the estimated share of income which a worker at age 50 must save privately in addition to contributions to the pension system if she wants to enjoy an adequate lifestyle during retirement. The respective figure for Switzerland is 14%, while in Germany it is 30%, in the United Kingdom 26% and in France 44% (UBS 2021).
Typically, low-income groups are neither covered by the second pillar nor can they afford to use the third pillar (FSO 2023). If their pension income does not meet the minimal costs of living, they can apply for additional payments (Ergänzungsleistungen). For example, a pensioner (single, with usual rent and health insurance costs) who receives the minimum pension is entitled to another CHF 6,000 per annum as supplementary benefits, resulting in an annual income of about CHF 20,000 (https://www.ahv-iv.ch/en/Social-insurances/Supplementary-benefits-EL). Given the Swiss cost of living, it is extremely hard to survive with this income. In addition, these additional payments are means-tested – that is, they are stigmatizing, and many individuals who are entitled to additional payments either do not know about it, are discouraged by the complexity of the system or are embarrassed to ask for this social assistance (Leyvraz et al. 2022).
Statistics from the OECD (2022) and a recent survey on old-age poverty (Pro Senecute 2022) show that Switzerland’s old-age poverty rate is above the OECD average. Old-age poverty affects about 15% of the population aged 65 or above, which is striking given the overall wealth of the country. This rate could be halved if all eligible pensioners claimed social assistance (Pro Senecute 2023). Poverty is measured as having an income below half the national median equivalized household disposable income. If a measure of material deprivation is applied, Switzerland has one of the lowest shares of the population aged 65 or above being in a state of deprivation (i.e., not possessing items considered basic, such as a washing machine, telephone or television; not living in a neighborhood without excessive criminality or noise; and not being able to afford expenditures such as eating meat twice a week, heating the apartment or paying an unforeseen expenditure of around CHF 2,000) (Bonoli and Fossati 2022; 2023: 708 – 709).
The second pillar is a funded system financed through contributions by employers and employees. Contributions and benefits are proportional to income. Employees whose income from the first pillar already covers about 60% of their wage income are not entitled to this system. Many pension programs, particularly in the public sector, are very generous and provide pension incomes (first and second pillars combined) that exceed 60% of previous income. Historically, this system of occupational pensions is the core of the Swiss pension system, and powerful interests – especially major political parties and financial institutions – have allowed for only piecemeal reforms (Armingeon 2018; Leimgruber 2008).
The third pillar takes the form of personal tax-deductible savings of up to CHF 7,056 per year (2023). This system benefits high-income groups, since they can afford to put aside these sums and have the highest returns on these savings given the tax advantages.
In international comparison, the Swiss pension system performs extremely well. According to a comparative analysis of 24 countries, this system has one of the smallest pension gaps among developed democracies. A pension gap is the estimated share of income which a worker at age 50 must save privately in addition to contributions to the pension system if she wants to enjoy an adequate lifestyle during retirement. The respective figure for Switzerland is 14%, while in Germany it is 30%, in the United Kingdom 26% and in France 44% (UBS 2021).
Typically, low-income groups are neither covered by the second pillar nor can they afford to use the third pillar (FSO 2023). If their pension income does not meet the minimal costs of living, they can apply for additional payments (Ergänzungsleistungen). For example, a pensioner (single, with usual rent and health insurance costs) who receives the minimum pension is entitled to another CHF 6,000 per annum as supplementary benefits, resulting in an annual income of about CHF 20,000 (https://www.ahv-iv.ch/en/Social-insurances/Supplementary-benefits-EL). Given the Swiss cost of living, it is extremely hard to survive with this income. In addition, these additional payments are means-tested – that is, they are stigmatizing, and many individuals who are entitled to additional payments either do not know about it, are discouraged by the complexity of the system or are embarrassed to ask for this social assistance (Leyvraz et al. 2022).
Statistics from the OECD (2022) and a recent survey on old-age poverty (Pro Senecute 2022) show that Switzerland’s old-age poverty rate is above the OECD average. Old-age poverty affects about 15% of the population aged 65 or above, which is striking given the overall wealth of the country. This rate could be halved if all eligible pensioners claimed social assistance (Pro Senecute 2023). Poverty is measured as having an income below half the national median equivalized household disposable income. If a measure of material deprivation is applied, Switzerland has one of the lowest shares of the population aged 65 or above being in a state of deprivation (i.e., not possessing items considered basic, such as a washing machine, telephone or television; not living in a neighborhood without excessive criminality or noise; and not being able to afford expenditures such as eating meat twice a week, heating the apartment or paying an unforeseen expenditure of around CHF 2,000) (Bonoli and Fossati 2022; 2023: 708 – 709).
Citations:
Armingeon, Klaus. 2018. “Die Entwicklung der schweizerischen Altersvorsorge.” Swiss Political Science Review 24 (1): 43-52. https://doi.org/10.1111/spsr.12291
Bertozzi, Fabio, Giuliano Bonoli, and Benoit Gay-des-Combes. 2005. La Reìforme De L’etat Social En Suisse. Vieillissement, Emploi, Conflit Travail-Famille. Lausanne: Presses polytechniques et universitaires romandes.
Bonoli, Giuliano, and Flavia Fossati. 2022. “Les politiques sociales.” In Handbuch der Schweizer Politik, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati, 7th ed., 883-902.
Bonoli, Giuliano, and Flavia Fossati. 2023. “Social Policy.” In The Oxford Handbook of Swiss Politics, eds. Patrick Emmenegger, Flavia Fossati, Silja Häusermann, Yannis Papadopoulos, Pascal Sciarini, and Adrian Vatter. Oxford: Oxford University Press, 695–713. https://doi.org/10.1093/oxfordhb/9780192871787.013.36
FSO (Federal Statistical Office, Bundesamt für Statistik). 2023. “Recipients of Old-Age Benefits.” https://www.bfs.admin.ch/bfs/en/home/statistics/social-security/old-age-provision-reports/recipients-old-age-benefits.html
Anne-Cécile Leyvraz, Jean-Pierre Tabin, Cédric Gaspoz, Camille Pellaton, Boris Fritscher, and Ulysse Rosselet. 2022. “Obstacles au développement d’un instrument pour lutter contre le non-recours aux prestations sociales sous condition de ressources en Suisse romande.” Schweizerische Zeitschrift für Soziale Arbeit 30: 63-83.
Leimgruber, Matthieu. 2008. Solidarity without the State?: Business and the Shaping of the Swiss Welfare State, 1890-2000. Cambridge: Cambridge University Press.
OECD. 2023. Pensions at a Glance. Paris: OECD.
Pro Senecute. 2022. “Altersmonitor. Altersarmut in der Schweiz 2022, Teilbericht 1.” https://www.prosenectute.ch/de/fachwelt/publikationen/altersmonitor.html
Pro Senecute. 2023. “Altersmonitor. Nichtbezug von Ergänzungsleistungen in der Schweiz, Teilbericht 2.” https://www.prosenectute.ch/de/fachwelt/publikationen/altersmonitor.html
UBS. 2021. “UBS International Pension Gap Index.” https://www.ubs.com/ch/de/private/pension/pension-gap-index.html
Armingeon, Klaus. 2018. “Die Entwicklung der schweizerischen Altersvorsorge.” Swiss Political Science Review 24 (1): 43-52. https://doi.org/10.1111/spsr.12291
Bertozzi, Fabio, Giuliano Bonoli, and Benoit Gay-des-Combes. 2005. La Reìforme De L’etat Social En Suisse. Vieillissement, Emploi, Conflit Travail-Famille. Lausanne: Presses polytechniques et universitaires romandes.
Bonoli, Giuliano, and Flavia Fossati. 2022. “Les politiques sociales.” In Handbuch der Schweizer Politik, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati, 7th ed., 883-902.
Bonoli, Giuliano, and Flavia Fossati. 2023. “Social Policy.” In The Oxford Handbook of Swiss Politics, eds. Patrick Emmenegger, Flavia Fossati, Silja Häusermann, Yannis Papadopoulos, Pascal Sciarini, and Adrian Vatter. Oxford: Oxford University Press, 695–713. https://doi.org/10.1093/oxfordhb/9780192871787.013.36
FSO (Federal Statistical Office, Bundesamt für Statistik). 2023. “Recipients of Old-Age Benefits.” https://www.bfs.admin.ch/bfs/en/home/statistics/social-security/old-age-provision-reports/recipients-old-age-benefits.html
Anne-Cécile Leyvraz, Jean-Pierre Tabin, Cédric Gaspoz, Camille Pellaton, Boris Fritscher, and Ulysse Rosselet. 2022. “Obstacles au développement d’un instrument pour lutter contre le non-recours aux prestations sociales sous condition de ressources en Suisse romande.” Schweizerische Zeitschrift für Soziale Arbeit 30: 63-83.
Leimgruber, Matthieu. 2008. Solidarity without the State?: Business and the Shaping of the Swiss Welfare State, 1890-2000. Cambridge: Cambridge University Press.
OECD. 2023. Pensions at a Glance. Paris: OECD.
Pro Senecute. 2022. “Altersmonitor. Altersarmut in der Schweiz 2022, Teilbericht 1.” https://www.prosenectute.ch/de/fachwelt/publikationen/altersmonitor.html
Pro Senecute. 2023. “Altersmonitor. Nichtbezug von Ergänzungsleistungen in der Schweiz, Teilbericht 2.” https://www.prosenectute.ch/de/fachwelt/publikationen/altersmonitor.html
UBS. 2021. “UBS International Pension Gap Index.” https://www.ubs.com/ch/de/private/pension/pension-gap-index.html
USA
The Social Security Act of 1935 established a federal public pension scheme for American workers. Before this legislation, many states had their own pension schemes, and workplace pension schemes were becoming more common. The original act had many gaps, particularly its exclusion of workers in agriculture and domestic service, which disproportionately affected African Americans.
Today, the U.S. public pension, known by Americans as “Social Security,” is a bedrock welfare benefit that enjoys widespread public support. When President George W. Bush attempted to privatize the scheme following his reelection in 2004, he faced significant backlash and had to abandon his plans.
Social Security is a protected part of the federal government’s spending regime. It is a non-discretionary program, meaning it is not subject to annual budget wrangling. The benefit is automatically adjusted for cost-of-living to account for inflation. However, there are criticisms that these adjustments are not always sufficient to meet the rising needs of American pensioners.
The federal Social Security pension is insufficient for a comfortable retirement in most parts of the United States, especially for those with low earnings during their working years. As a result, many Americans rely on private pension schemes, typically provided by their employers, which offer more generous benefits. However, not all workers or Americans have access to such schemes, leading to significant variability in retirement economics. Consequently, many elderly Americans continue working to supplement their income. Additionally, old-age poverty is comparatively high in the United States.
In 2022, the Biden administration awarded $36 billion to prevent cuts to the pensions of union workers and retirees. The funding comes from the American Rescue Plan.
Today, the U.S. public pension, known by Americans as “Social Security,” is a bedrock welfare benefit that enjoys widespread public support. When President George W. Bush attempted to privatize the scheme following his reelection in 2004, he faced significant backlash and had to abandon his plans.
Social Security is a protected part of the federal government’s spending regime. It is a non-discretionary program, meaning it is not subject to annual budget wrangling. The benefit is automatically adjusted for cost-of-living to account for inflation. However, there are criticisms that these adjustments are not always sufficient to meet the rising needs of American pensioners.
The federal Social Security pension is insufficient for a comfortable retirement in most parts of the United States, especially for those with low earnings during their working years. As a result, many Americans rely on private pension schemes, typically provided by their employers, which offer more generous benefits. However, not all workers or Americans have access to such schemes, leading to significant variability in retirement economics. Consequently, many elderly Americans continue working to supplement their income. Additionally, old-age poverty is comparatively high in the United States.
In 2022, the Biden administration awarded $36 billion to prevent cuts to the pensions of union workers and retirees. The funding comes from the American Rescue Plan.
Pension policies are only somewhat aligned with the goal of preventing old-age poverty.
5
Estonia
Estonia has had a three-pillar pension system since 2002. In 2019, the poor performance of pension funds, high administrative costs and limited choices for citizens triggered a reform of the mandatory second pillar. Despite legal amendments that relaxed investment restrictions and reduced administrative costs, the 2019 pension reform introduced an opt-out option from the statutory pillar II funded pension scheme. By the end of 2021, 24% of all second-pillar assets owned by 23% of insured people under 60 were withdrawn (EV 2022). Nearly half (48%) of those who opted out were aged 35 – 49, posing a significant sustainability risk (OECD 2023). Making the second pillar voluntary puts additional pressure on the first, pay-as-you-go pillar, reducing the future adequacy of pensions and increasing the long-term risk of poverty.
As of 2023, despite annual indexation and an increase in the minimum pension, the average public old-age pension in Estonia remains among the lowest relative to work income, and poverty among the elderly is the highest in the EU. This is primarily because the average old-age pension falls below the at-risk-of-poverty threshold. Currently, approximately one in 10 pensioners receive a pension lower than the requirement of the social charter, and this proportion is increasing. Furthermore, Estonia does not meet the average pension goal, as the combined pillar I and II pension of the median wage earner is less than 60% of the median wage.
The risk of inadequate old-age pensions for people in nonstandard employment is mitigated by the points system of pay-as-you-go calculations, which does not discriminate between different contract types. Still, this system cannot address infrequent contributions to social insurance or the career precariousness associated with nonstandard employment. Therefore, the inadequacy and inequality of pensions are expected to increase. This will lead to a growing need for future policy changes to raise public awareness of the pension system, improve the contribution of voluntary tiers and enhance the sustainability of pension system funding.
As of 2023, despite annual indexation and an increase in the minimum pension, the average public old-age pension in Estonia remains among the lowest relative to work income, and poverty among the elderly is the highest in the EU. This is primarily because the average old-age pension falls below the at-risk-of-poverty threshold. Currently, approximately one in 10 pensioners receive a pension lower than the requirement of the social charter, and this proportion is increasing. Furthermore, Estonia does not meet the average pension goal, as the combined pillar I and II pension of the median wage earner is less than 60% of the median wage.
The risk of inadequate old-age pensions for people in nonstandard employment is mitigated by the points system of pay-as-you-go calculations, which does not discriminate between different contract types. Still, this system cannot address infrequent contributions to social insurance or the career precariousness associated with nonstandard employment. Therefore, the inadequacy and inequality of pensions are expected to increase. This will lead to a growing need for future policy changes to raise public awareness of the pension system, improve the contribution of voluntary tiers and enhance the sustainability of pension system funding.
Citations:
EV Sotsiaalministeerium (Ministry of Social Affairs). 2022. Eesti pensionisüsteemi jätkusuutlikkuse analüüs 2022. (The sustainability Analysis of Estonian Pension System)
OECD. 2023. Pensions at a Glance. Country Profiles – Estonia.
EV Sotsiaalministeerium (Ministry of Social Affairs). 2022. Eesti pensionisüsteemi jätkusuutlikkuse analüüs 2022. (The sustainability Analysis of Estonian Pension System)
OECD. 2023. Pensions at a Glance. Country Profiles – Estonia.
Italy
According to the latest INPS annual report (2023), the proportion of “poor pensioners” is high, even when considering multiple benefits (old-age, invalidity, survivors’, and social allowances). Additionally, pension income heterogeneity is significant. In 2021, excluding those who retired before age 50, 20% of pensioners had a gross pension income of less than €10,000 per year. This proportion remains substantial at 7.3% even when considering former private employees with occupational pensions who retired from 2017 onward. One-third of pensioners (32.8%) receive a pension of no more than €1,000 gross per month.
The report also shows that inequality in pension income is increasing, similar to labor income. The Gini index of gross annual pension income has steadily risen from approximately 0.30 in 1995 to around 0.35 in 2021. The increase in pension income inequality reflects trends in the labor market, where evidence shows growing inequality and low mobility, perpetuating income disparities. Variable redistributive mechanisms implicit in the pension calculation formula exacerbate this issue, particularly for pensioners under the retributive formula. For instance, salary increases at the end of one’s career and different parameters applied in various administrations can significantly affect the pension amount.
The report also shows that inequality in pension income is increasing, similar to labor income. The Gini index of gross annual pension income has steadily risen from approximately 0.30 in 1995 to around 0.35 in 2021. The increase in pension income inequality reflects trends in the labor market, where evidence shows growing inequality and low mobility, perpetuating income disparities. Variable redistributive mechanisms implicit in the pension calculation formula exacerbate this issue, particularly for pensioners under the retributive formula. For instance, salary increases at the end of one’s career and different parameters applied in various administrations can significantly affect the pension amount.
Citations:
INPS. 2023. XII Rapporto ANNUALE. https://www.inps.it/it/it/dati-e-bilanci/rapporti-annuali/xxii-rapporto-annuale.html
INPS. 2022. XXI Rapporto Annuale. https://www.inps.it/it/it/dati-e-bilanci/rapporti-annuali/xxi-rapporto-annuale.html
INPS. 2023. XII Rapporto ANNUALE. https://www.inps.it/it/it/dati-e-bilanci/rapporti-annuali/xxii-rapporto-annuale.html
INPS. 2022. XXI Rapporto Annuale. https://www.inps.it/it/it/dati-e-bilanci/rapporti-annuali/xxi-rapporto-annuale.html
Japan
Japan spends 9.3% of GDP on its public pension system, which is above the OECD average (7.7%). All Japanese between 20 and 59 years old are enrolled in the basic pension scheme, while all employees are additionally enrolled in the earnings-related plan. Self-employed workers pay a flat-rate contribution and employees pay 18.3% of their salaries, with half of it covered by employers. The retirement age is 65.
The basic pension benefit in 2022 amounted to only JPY 777,800 (€5,000) per year for workers who have contributed fully and without interruption. Workers are exempt from contributing to the basic pension during maternity periods and parental leaves. Unemployed persons remain in the basic pension scheme and may be fully or partly exempt from paying a flat-rate contribution depending on household income. Periods spent out of work due to childcare are taken into account in the earnings-related pension insurance scheme up to three years per child.
Net pension replacement rates from mandatory schemes in Japan are among the lowest, while the senior citizen poverty rate is among the highest in the OECD. However, most regular workers receive large lump sum payments at the end of their careers and these payments constitute an important source of income in old age. Actual poverty rates are, therefore, lower than income figures suggest. Nonetheless, workers with non-standard work biographies and, in particular non-regular workers, rarely receive such payments and thus are particularly hard hit by the low replacement level of the public pension system. Alternative ways to save for old age, such as Nippon Individual Savings Accounts (NISA) and Individual Defined Contribution Accounts (iDeCo), have only been rolled out in recent years and may come too late for workers who will retire within the next decade. Moreover, they require that wages are high enough so that workers are able to make contributions, which is rarely the case in low-paying non-regular jobs.
The basic pension benefit in 2022 amounted to only JPY 777,800 (€5,000) per year for workers who have contributed fully and without interruption. Workers are exempt from contributing to the basic pension during maternity periods and parental leaves. Unemployed persons remain in the basic pension scheme and may be fully or partly exempt from paying a flat-rate contribution depending on household income. Periods spent out of work due to childcare are taken into account in the earnings-related pension insurance scheme up to three years per child.
Net pension replacement rates from mandatory schemes in Japan are among the lowest, while the senior citizen poverty rate is among the highest in the OECD. However, most regular workers receive large lump sum payments at the end of their careers and these payments constitute an important source of income in old age. Actual poverty rates are, therefore, lower than income figures suggest. Nonetheless, workers with non-standard work biographies and, in particular non-regular workers, rarely receive such payments and thus are particularly hard hit by the low replacement level of the public pension system. Alternative ways to save for old age, such as Nippon Individual Savings Accounts (NISA) and Individual Defined Contribution Accounts (iDeCo), have only been rolled out in recent years and may come too late for workers who will retire within the next decade. Moreover, they require that wages are high enough so that workers are able to make contributions, which is rarely the case in low-paying non-regular jobs.
Citations:
Horioka, Charles Yuji. 2009. “The (Dis)saving Behavior of the Aged in Japan.” NBER Working Paper 15601.
http://www.nber.org/papers/w15601
OECD. 2023. “Pensions at a Glance 2023: OECD and G20 Indicators.” https://doi.org/10.1787/678055dd-en
OECD. 2023. “Pensions at a Glance 2023: Country Profiles – Japan.” https://www.oecd.org/els/public-pensions/PAG2023-country-profile-Japan.pdf
Siripala, Thisanka. 2023. “Surviving Old Age Is Getting Harder in Japan.” https://thediplomat.com/2023/01/surviving-old-age-is-getting-harder-in-japan/
Horioka, Charles Yuji. 2009. “The (Dis)saving Behavior of the Aged in Japan.” NBER Working Paper 15601.
http://www.nber.org/papers/w15601
OECD. 2023. “Pensions at a Glance 2023: OECD and G20 Indicators.” https://doi.org/10.1787/678055dd-en
OECD. 2023. “Pensions at a Glance 2023: Country Profiles – Japan.” https://www.oecd.org/els/public-pensions/PAG2023-country-profile-Japan.pdf
Siripala, Thisanka. 2023. “Surviving Old Age Is Getting Harder in Japan.” https://thediplomat.com/2023/01/surviving-old-age-is-getting-harder-in-japan/
Poland
The current pension system is based on pension contributions paid to the Social Insurance Institution (ZUS), Poland’s pension authority. There has been a year-on-year reduction in the ratio of benefits to the average salary, declining from 58.1% in 2013 to 50.4% in 2022. The average pension in 2022 was PLN 2,767.47, a 9% increase compared to the corresponding period in the previous year. However, this increase did not offset retirees’ expenses, which rose due to a year-over-year inflation rate that exceeded 18% in March 2023 (Markowski 2024).
The system supports citizens with additional benefits paid alongside or with the main benefit. These include programs for mothers with four or more children, for individuals with disabilities and for those unable to live independently.
The system supports citizens with additional benefits paid alongside or with the main benefit. These include programs for mothers with four or more children, for individuals with disabilities and for those unable to live independently.
Citations:
Markowski, Radoslaw. 2024. “Polish Election of 2023: Mobilization in Defence of Liberal Democracy.” West European Politics [forthcoming].
Markowski, Radoslaw. 2024. “Polish Election of 2023: Mobilization in Defence of Liberal Democracy.” West European Politics [forthcoming].
Slovakia
The pension system partly ensures an old-age income for individuals in non-standard employment or with interrupted employment histories. Persons with less than 15 years of social pension insurance are not eligible for a pension, although insurance from other EU countries counts. Self-employed persons contribute to pension insurance, with a minimum level defined independently from the tax base. Disabled persons have a specific disability pension scheme. The state does not pay pension insurance for the unemployed, meaning that periods of unemployment do not count toward pension entitlement.
Women’s old-age poverty is a significant issue, driven by two core factors: a relatively low level of pension benefits in Slovakia and income gender inequality. Wage differences between men and women in Slovakia are higher than the European Union average, currently at 16.6%. This inequality in pay affects the entire society’s standard of living. Salary differences, despite women’s higher educational attainment, make women more at risk of poverty, especially seniors and widows. Gender inequality also extends to pension amounts, with Slovak women receiving, on average, 18% lower pensions than men.
The state pension benefit must provide an old-age income that enables citizens to meet their basic needs. The minimum pension of €376.50 in 2023 is guaranteed only to people with 30 or more years of pension insurance. The average pension was approximately €650 in 2023. Single persons with pensions below €500 may have significant problems covering their basic needs independently, even if they live in their own housing. Persons who have to pay for rental housing may need €700–€800 monthly to cover their basic needs (National Bank, 2023).
Women’s old-age poverty is a significant issue, driven by two core factors: a relatively low level of pension benefits in Slovakia and income gender inequality. Wage differences between men and women in Slovakia are higher than the European Union average, currently at 16.6%. This inequality in pay affects the entire society’s standard of living. Salary differences, despite women’s higher educational attainment, make women more at risk of poverty, especially seniors and widows. Gender inequality also extends to pension amounts, with Slovak women receiving, on average, 18% lower pensions than men.
The state pension benefit must provide an old-age income that enables citizens to meet their basic needs. The minimum pension of €376.50 in 2023 is guaranteed only to people with 30 or more years of pension insurance. The average pension was approximately €650 in 2023. Single persons with pensions below €500 may have significant problems covering their basic needs independently, even if they live in their own housing. Persons who have to pay for rental housing may need €700–€800 monthly to cover their basic needs (National Bank, 2023).
Citations:
Národná banka SR. 2023. Ekonomické životné minimum – nová metrika životných nákladov domácností. Bratislava: Národná banka.
Šoltés, E., Komara, S., and Šoltésová, T. 2023. “Exploration of Poverty and Social Exclusion of Slovak Population via Contrast Analysis Associated with Logit Models.” Qual Quant 57: 5079–5105. https://doi.org/10.1007/s11135-022-01573-9
Národná banka SR. 2023. Ekonomické životné minimum – nová metrika životných nákladov domácností. Bratislava: Národná banka.
Šoltés, E., Komara, S., and Šoltésová, T. 2023. “Exploration of Poverty and Social Exclusion of Slovak Population via Contrast Analysis Associated with Logit Models.” Qual Quant 57: 5079–5105. https://doi.org/10.1007/s11135-022-01573-9
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Hungary
Although international comparisons place Hungary relatively well regarding senior-citizen poverty rates, the reality is misleading. Even if the indicator assessing median equivalized disposable income with a cut-off point 50% ranks Hungary in the upper midfield at ninth place, the underlying conditions of low incomes, high prices and inflation indicate a high threat of poverty for pensioners. The average monthly pension is €539, which is insufficient given the economic conditions. Government policies have exacerbated the problem, necessitating reform.
Retirement entry ages in Hungary are currently 65 for men and 62 for women (OECD 2023). However, these ages are slated to increase to 65 for both genders. In 1997, Hungary introduced a three-pillar pension system following World Bank guidelines, featuring a mandatory, fully funded second pillar. Upon taking office, the second Orbán government abolished this second pillar and confiscated its assets. Additionally, it moved disability pensions to the social assistance scheme and eliminated certain early retirement options. While these measures have limited pension growth and undermined trust in pension policy reliability, they have improved the financial status of the public pension scheme. Public spending on pensions decreased from 11% of GDP in 2010 to 8% in 2020. The growing disparity between wage growth and pensions has left pensioners among the most disadvantaged groups. To mitigate electoral fallout, the government has introduced discretionary pension increases before elections. In 2020 – 2021, it gradually reintroduced the 13th-month pension, widely perceived as an election campaign strategy for the 2022 parliamentary elections (Gál 2020). In the election, Fidesz performed well among pensioners. In 2022, a somewhat larger-than-planned pension increase took place.
Retirement entry ages in Hungary are currently 65 for men and 62 for women (OECD 2023). However, these ages are slated to increase to 65 for both genders. In 1997, Hungary introduced a three-pillar pension system following World Bank guidelines, featuring a mandatory, fully funded second pillar. Upon taking office, the second Orbán government abolished this second pillar and confiscated its assets. Additionally, it moved disability pensions to the social assistance scheme and eliminated certain early retirement options. While these measures have limited pension growth and undermined trust in pension policy reliability, they have improved the financial status of the public pension scheme. Public spending on pensions decreased from 11% of GDP in 2010 to 8% in 2020. The growing disparity between wage growth and pensions has left pensioners among the most disadvantaged groups. To mitigate electoral fallout, the government has introduced discretionary pension increases before elections. In 2020 – 2021, it gradually reintroduced the 13th-month pension, widely perceived as an election campaign strategy for the 2022 parliamentary elections (Gál 2020). In the election, Fidesz performed well among pensioners. In 2022, a somewhat larger-than-planned pension increase took place.
Citations:
OECD. 2023. “Pensions at a Glance.” https://www.oecd.org/publications/oecd-pensions-at-a-glance-19991363.htm
OECD. 2023. “Pensions at a Glance.” https://www.oecd.org/publications/oecd-pensions-at-a-glance-19991363.htm
Israel
Each elderly citizen in Israel is eligible for a monthly allowance of ILS 2,337. Elderly citizens without an additional pension receive a supplementary benefit, bringing their total monthly allowance to ILS 3,237. Unlike in many other OECD countries, most elderly people’s income in Israel comes from private, not public, sources. Consequently, about 65% of elderly people continue to work past the official retirement age. Among those who do not work, 54% lack pension savings and thus depend on government support, with many falling below the poverty line (Macro 2021).
The average income of an elderly person is ILS 7,381 per year, while their average expenses amount to ILS 8,563 per year. One in five elderly citizens lives in poverty.
Following the large wave of immigration from Russia in the 1990s, a significant proportion of the population lacks any pension at all. Additionally, a sizable veteran population lacks pension savings. Mandatory pension coverage has only been in place since 2008 and applies exclusively to employed individuals. As a result, the pension savings of those in precarious jobs are low and their rights are sometimes compromised due to inconsistent payments (Lurie 2018).
Taken together, the existing pension system does not cover the basic needs of Israel’s elderly population. While the mandatory pension improves the situation for workers entering the labor market, it is insufficient for older people who did not have enough time to save for a pension, including immigrants who do not receive pensions from their countries of origin.
The average income of an elderly person is ILS 7,381 per year, while their average expenses amount to ILS 8,563 per year. One in five elderly citizens lives in poverty.
Following the large wave of immigration from Russia in the 1990s, a significant proportion of the population lacks any pension at all. Additionally, a sizable veteran population lacks pension savings. Mandatory pension coverage has only been in place since 2008 and applies exclusively to employed individuals. As a result, the pension savings of those in precarious jobs are low and their rights are sometimes compromised due to inconsistent payments (Lurie 2018).
Taken together, the existing pension system does not cover the basic needs of Israel’s elderly population. While the mandatory pension improves the situation for workers entering the labor market, it is insufficient for older people who did not have enough time to save for a pension, including immigrants who do not receive pensions from their countries of origin.
Citations:
Lurie, L. 2018. “Pension Privatization in Israel.” In A. Paz-Fuchs, R. Mandelkern, and I. Galnoor, eds., The Privatization of Israel: The Withdrawal of State Responsibility, 101–121. Palgrave Macmillan. https://www.palgrave.com/gp/book/9781137601568#otherversion=9781137582614
Macro-center for policy and economy – Elderly in Israel. 2021. https://www.macro.org.il/images/upload/items/33224296121214.pdf
Lurie, L. 2018. “Pension Privatization in Israel.” In A. Paz-Fuchs, R. Mandelkern, and I. Galnoor, eds., The Privatization of Israel: The Withdrawal of State Responsibility, 101–121. Palgrave Macmillan. https://www.palgrave.com/gp/book/9781137601568#otherversion=9781137582614
Macro-center for policy and economy – Elderly in Israel. 2021. https://www.macro.org.il/images/upload/items/33224296121214.pdf
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Pension policies are not at all aligned with the goal of preventing old-age poverty.
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