The Financial Burden of Pensions in Europe. A Cross-country Comparison

Anne Lavigne, Antti Mielonen, Niko Väänänen () and Mika Vidlund

Revue de l'OFCE, 2024, vol. N° 184, issue 1, 193-226

Abstract: Across Europe, ageing populations strain national budgets as pension costs rise. This article aims to provide a comprehensive view on how much is being contributed and by whom into pension systems in eight European countries: Denmark, Finland, France, Germany, Italy, the Netherlands, Norway and Sweden. To obtain comparable results, the pension systems addressed in this paper include basic and earnings-related pensions organised in statutory (first pillar) and occupational (second pillar) pension schemes, but exclude private pension savings. Using 2020 data, the paper analyses contributions from employees, employers and taxes. When all pension schemes are combined, contribution levels converge across countries, averaging 14.6% of GDP. Italy and Denmark contribute the most (16.8% and 16.7%), while Sweden and Finland contribute the least (12.1% and 12.5%). Focusing on the contribution breakdown, employers? contributions generally account for the greatest share (50% on average), followed by tax revenue (30%) and employee contributions (20%). Denmark relies heavily on taxes (60%), while Sweden relies on employers (67%). At the individual level, financing costs are progressive in Denmark, France and (somewhat) Sweden, meaning higher earners pay more. They are flat in Finland and Italy, and regressive in the Netherlands and Germany.

Keywords: Pension contributions; Europe; Financing cost (search for similar items in EconPapers)
Date: 2024
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