Pensions have become a central issue in some of Europe’s most significant political crises. In France, they have fueled one of the worst periods of political turmoil since the 1960s. In Germany, pension reform threatens the future of the coalition government. In Spain, thousands have taken to the streets to demand change.
For decades, the right to a decent state pension has been a cornerstone of the European social contract. However, with people living longer, birthrates falling, and pension systems becoming increasingly unsustainable, this model is under severe strain.
Most European countries operate a “pay as you go” system, where current workers fund the pensions of current retirees. When fewer workers are contributing to support a growing number of pensioners for longer periods, the financial pressure mounts quickly.
While occupational and private pensions now form a significant part of retirement income in many countries, state pensions remain a welfare foundation. Cutting benefits or raising the retirement age is deeply unpopular, and politicians are often reluctant to pursue such reforms.
This reluctance is partly because the median European voter is now in their mid-40s, and governments risk losing significant support by penalizing older generations. Consequently, only a few countries, like the Netherlands, have implemented major changes.
Most nations face widening pension shortfalls. Retirement ages across Europe vary by up to eight years, and monthly state pensions range from €226 in Bulgaria to €2,575 in Luxembourg. For 80% of EU pensioners, the state pension is their sole income, and about 15% are at risk of poverty.
France
* Minimum state pension age: 62
* Average monthly state pension: €1,500
* State pension cost as % of GDP: 13.4%
* Population over 65: 40.2%
France’s pensioners earn, on average, slightly more than those still working. This is partly due to a generous mandatory state pension, which can pay up to 50% of previous salary for those with full contributions. The average pension is about €1,500 per month.
With a relatively early retirement age and high life expectancy, French men can expect nearly 23 years in retirement, and women about 26 years—among the highest in the OECD. France also has the lowest qualifying age among major EU economies.
However, this system is expensive, costing 13.4% of GDP, well above the OECD average of 8.1%. President Emmanuel Macron’s attempts to overhaul it have faced massive resistance. A 2019 effort sparked the largest cumulative wave of strikes since 1968. A second attempt in 2023, which included raising the retirement age to 64, led to huge protests. The government eventually pushed the reform through parliament without a vote, but the prime minister has since suspended its implementation until 2027 to survive a no-confidence motion.
Germany
* Retirement age: 66
* Average monthly state pension: €1,600
* State pension cost as % of GDP: 10.8%
* Population over 65: 39.8%
Germany’s demographic shift is stark. In the early 1960s, there were about six workers for every retiree. Today, that ratio has fallen to roughly two to one and continues to decline rapidly. The federal government has calculated it would need to spend significantly more to maintain the current system.Germany will spend a quarter of its total €525 billion budget next year to meet the needs of its statutory pension system, and is facing growing pressure to reform it. The scheme is mandatory for all salaried workers except civil servants, who have their own system. Nearly 19% of gross pay—capped and split between worker and employer—goes into the fund. Pensions currently amount to about 48% of the average monthly wage.
Concerned that young people will bear the brunt of an unsustainable system, the government has proposed incentivizing private investment, raising taxes for higher earners, and increasing the retirement age, which is planned to rise to 67 from 2029. Following a bill passed in December, the value of pensions as a percentage of average salary will also fall to 47% from 2031. A growing number of pensioners, especially women, say they cannot live adequately on their statutory pensions. In response, a recent bill included a “Mütterrente,” or retirement bonus for mothers. Pensioners in Germany generally do not receive travel perks or other discounts, and many continue to pay rent, as most Germans do not own their homes.
In Spain, the average monthly state pension is about €1,512, paid to roughly 6.6 million retirees. The state paid out nearly €10 billion in retirement pensions in October alone, with pensions accounting for about 12% of GDP. Although there are currently 2.6 working-age people for every person over 65, that ratio is projected to fall to 1.6 to one by 2050, putting further strain on public finances. By 2048, an estimated 15 million people will be eligible for pensions.
In 2011, Spain agreed to gradually raise the retirement age from 65 to 67 by 2027, increasing it by two months each year. However, the actual retirement age depends on years of paid contributions. In 2023, Spain’s socialist-led government struck a deal with unions to offset the rising number of pensioners by introducing a “solidarity tax” that increased social security costs for businesses with higher-earning workers. It also introduced a 0.6% social contribution called the “intergenerational equity mechanism”—split 0.5% for employers and 0.1% for employees—to top up the state’s pension fund. This rate will rise to 1.2% by 2029.
The government claims the system is sustainable and performing well. However, in October, around 8,000 people demonstrated in Madrid to demand a minimum pension aligned with the minimum wage and an end to the gender pension gap.
Denmark has increased its retirement age in line with life expectancy every five years since 2006, with little controversy or public debate. But this year marked a turning point when MPs voted to raise it from 67 to 70 by 2040—the highest in the EU. Social Democrat Prime Minister Mette Frederiksen had already called for reform, stating that her party would no longer support automatically tying the retirement age to life expectancy and that the system should be more “lenient and fair.” However, her party has provided few details on how it plans to overhaul a state pension system that costs about 7% of GDP annually, setting the stage for what could become a pensions bidding war ahead of next year’s general election.
Many people fear they will not be able to work until 70. Arne Juhl, the face of a Social Democrat campaign for…A proponent of early retirement for disabled individuals said he might leave his party, partly because he believes the statutory retirement age should not go beyond 68.
Damoun Ashournia, chief economist at the Danish trade union confederation, stated that the retirement age must increase alongside life expectancy “for the welfare state to be financially sustainable,” but he called the current model “unnecessarily harsh.” He noted that polling shows growing support for parties with specific plans to improve the pension system, though proposals from the populist right have been “fiscally irresponsible.” He added that the Social Democrats “really need to present a cohesive plan.”
Signe Munk, a political spokesperson for the Green Left, said the Danish system “increasingly reflects inequality rather than fairness, with widening gaps in health and life expectancy. Addressing this requires political courage.”
The Netherlands
* Retirement age: 67
* Monthly state pension: €1,580
* Share of GDP represented by state pension: 6.4%
* Population over 65: 34.8%
The Dutch pension system, which combines a state pension (currently €1,580 from age 67), workplace schemes, and private savings, consistently ranks at or near the top in an annual global ranking by the Mercer consultancy.
While the Dutch still find things to complain about, their version of the three-pillar system is internationally recognized as adequate for retirees’ needs, transparent, and affordable. The state pension costs just over 6% of GDP, while highly regulated workplace schemes cover more than 90% of employees. These workplace funds are enormous, managing about €1.7 trillion in assets—the largest in the EU for a country with just 4% of the bloc’s population.
After decades of discussion, the Netherlands decided in 2023 to shift its workplace funds from defined benefit to defined contribution. This means there is no guaranteed payout, and part of an employee’s pension will depend on the savings they accumulate.
According to the Dutch central bank, the new system will offer workers greater flexibility and control and is “better suited to the current labour market, where employees change jobs more frequently.”
Frequently Asked Questions
FAQs Europes Pensions Crisis
BeginnerLevel Questions
What is a pensions crisis
Its a situation where the money set aside to pay for peoples retirement is not enough to meet future promises threatening the stability of the entire pension system
What is Europes social safety net
Its a system of government programs including state pensions unemployment benefits and healthcare designed to protect citizens from financial hardship due to old age sickness or job loss
Why is the state pension system at risk now
Primarily due to demographic change there are fewer young people working and paying taxes to support a growing number of older retirees living longer
What does aging population mean
It means the average age of the population is rising Europe has a low birth rate and increasing life expectancy leading to a larger proportion of older people compared to workingage adults
Is my personal pension or private savings also at risk
Your personal savings in a private pension plan are separate from the state system However the crisis can create economic pressure that affects investment returns and may lead governments to change tax rules on private pensions
Intermediate Questions
What are the main causes of the pensions crisis
1 Demographics Low birth rates and longer lifespans
2 Economic Stagnation Slow economic growth limits government tax revenue
3 High Public Debt Many governments already have high debt leaving less room to borrow to fund pensions
4 Labor Market Trends More precarious work can mean lower pension contributions
How are European governments trying to fix this
Common strategies include
Raising the official retirement age
Increasing worker and employer pension contributions
Reducing the generosity of future pension payouts
Encouraging private pension savings through tax incentives
What is a payasyougo pension system
This is the model for most European state pensions Current workers pay taxes that directly fund the pensions of current retirees Its not a personal savings pot its an intergenerational transfer that is vulnerable to demographic shifts
Which European countries are most affected
Countries with very low birth rates andor significant public debt are under severe strain However
