Europe is a greying continent. Nine of the 10 nations with the largest populations of over-65s in the world are in Europe. The average number of live births per woman in Europe has been slowly trending downwards over the decades (from roughly 2.4 in 1960 to 1.55 in 2018). It’s estimated that Europe’s working age population will decline by 0.4% every year between now and 2040. Can the continent’s pension systems cope if a shrinking workforce is supporting an ever-growing cohort of elderly retirees?

What do our readers think? First up, we had a comment sent in from AJ, who thinks that only high taxes can ensure sustainable pension systems going forwards. Is he right?

To get a response, we spoke to Matti Leppälä, CEO of PensionsEurope, a European association representing national associations of pension funds and similar institutions for workplace pensions. How would he react?

It’s really about finding a balance between what is adequate with regards to income and then what is sustainable. And ‘sustainability’ in Europe really means looking at the sustainability of public finances, which means taxpayer and public finance part of the economy. And what is crucial is to ensure that Europe can afford this in a globally competitive environment.

If European costs for retirement and other welfare state costs become too high, Europe will not be competitive, and that is the key challenge. Now, Europe has been working on this for two decades, to reform its pension systems – especially social security pensions – so Europe is much more sustainable financially than it was, but it means that many people will receive a pension from social security that is much lower than what people had before. This poses a challenge, people have to save much more by themselves than they did before – privately or through their workplace – to be able to have something similar to those who retired earlier.

Next up, we had a comment come in from Peter, who is convinced that Europe needs immigration to counter demographic decline and sustain European pension systems. Other commenters have argued EU Member States need to adopt measures to boost birth rates. Either, will the best way to put pension systems on a sustainable footing be to try to reverse Europe’s current demographic trend?

These are extremely difficult questions in the present environment; labour mobility and immigration are very challenging debates in Europe, and the COVID crisis makes it even more difficult. So, this is something that urgently needs to be addressed, and I agree we need to have a basis for growth. With an elderly population it is much more difficult to have a growing economy and, of course, the challenges for public finances are much, much greater when the relationship between people in working life with those who are retired deteriorates very rapidly; in Europe this may happen more than anywhere in the world.

So, this is really a crucial question. And Europe will play a role in this; we need a European approach to immigration and labour mobility, it is very much up to Europe to have policies and to regulate things, and the European Union is looking into policy initiatives on this, but these are going to be very difficult debates about immigration and mobility.

Can our pension systems cope with an aging population? Are European pensions systems sustainable given changing demographics? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!

IMAGE CREDITS: Photo by Lucrezia Carnelos on Unsplash

25 comments Post a commentcomment

What do YOU think?

  1. avatar

    No they cant. I hope enough politicians realise this now, and stop the erosion of our welfare state. Instead of less support we will need more support for retirees in the future.

  2. avatar

    Yes, Europe is ageing. Birthrates have been dropping for years, so people really should stop complaining about immigrants coming, we need more people to be active parts of society and our workfoprce!

  3. avatar

    If the big corporations would pay the tax they had to, and contribute to the pension system for the robot workforce, and younger people could work properly, yes, the states can pay our pensions.

  4. avatar

    If people don’t retire at 50 like many did in Portugal, or 55 like many want to, then sure. Also politicians retiring after 10 years is discusting…

  5. avatar

    Funny that you and your sponsors do everything in your power to bring down fertility rates and marriage rates. And then complain about an aging population.

    • avatar

      I see this similar to you. They support abortions, pro gay/lgbtq and then they are surprised that there aren’t enough babies. In my country you can pay for an abortion with health insurance but they make it difficult to pay for fertility treatments. European women work till they are 40 and then maybe think about having a child, whilst in developing nations women have babies in their 20’s. By the time they are 40 they have a grand child. A society without children is a dead society. Are there enough Arabs to fill every empty space in European society,. and do we want this?
      If people want this then go ahead, if they say no that’s fine too, but everything has consequences. Maybe it’s time to get rid of birth control and abortions for 10 years and see the difference in birth rates. I guarantee you people won’t stop fucking, so there will be babies.

  6. avatar

    I think we are slowly moving towards to a moment where the pension system as we know will change completly. I think we will move to a “guaranteed income” which will require a change of budgeting policies, tax policies, labor policies etc. It will not happen over night but eventually it will need to happen as technological progress will push us towards this change.

  7. avatar

    I have no idea. I lived and worked in many countries, in and outside Europe, and I’m not counting on a pension to be there when my time comes. This is just where this neoliberal global policy is slowly but surely taking us – and that’s the good scenario where climate and ecological collapse does not pitch in. It makes me very sad.

    • avatar
      JT HK

      Europe has been lip serving climate and ecology issues but have nothing done seriously on how to create a environmental friendly system which can still sustainable development of social economic well being of the people. However, China has identified over 300 village of poverty 20 years ago. Young fresh university graduates have been sent to do the administration in isolated and backward rural villages. Following this, a comprehensive team of experts/scientists would be send to carry out scientific studies and survey and subsequent to all researches, a comprehensive programme to reduce poverty and enhancing social and economic development taking consideration on environmental protection and building of new rural economy would be implemented. This would require determination of the government and support of the economy. What is important for Europe to realize good living for the people is talking less symbolic values but take serious action to tackle problems.

  8. avatar
    JT HK

    France has been heading towards decline for people who have not started working but think of the pension. A French came to HK before it had reunited with China. He said that HK people were very energetic and hardworking. Many people had been able to climb up the social ladder just in one generation. While in France, people do not work hard, any problem they have encountered, they blame the government. After HK has become a Special Administrative Region (SAR) of China. HK people have been given election at the district level council and the Legislative council. Political parties are allowed to establish and have grown light wild grasses. Party competition has immediately changed behaviour and mentality like the French i.e. don’t want to work for their own future at the first year they claim not seeing the future for they are not admitted to the medical school, law school and engineering department. They cannot earn lots of money even after graduation. So, they start to blame the SAR government of not giving them a good future, they foresee their salary would not be enough to buy an apartment, a private car and get marry. Except, they have not yet blamed the SAR government of not giving them a wife/husband.

  9. avatar

    It’s all about statistics and actuarial math. The problem is that all the governments spend the money we pay for OUR retirement. Otherwise it is more than simple, If each of us has a life expectancy of 72-75, and we pay 25% of our paychecks each year, for 40 years of work we should get 10 years of pension. Wich means 62-65 is really a normal age to quit job for good…

    • avatar

      except that many retire early and live longer…every additional year of unfunded layouts just adds to their insolvency !

    • avatar

      is only math… Some live longer, some less. It’s faith. The average is – for men – what I’ve mentioned.

    • avatar

      when my father was born (in 1926)and uk state pensions introduced…the retirement age was set at 65, ..assuming a working life of around 45-50 years and life expectancy for males was 67….in uk now, male life expectancy is 79 and over 80 for women….and working life is much shorter.
      The individual contributions made (in uk via NI) substantially undervalue the amount payable, even under the rather parsimonious uk state pension, so effectively they rely on current and future workers to pay the previous generation…france is in a similar situation, even though the obligatory contributions are much higher
      The only way to resolve this is either to push back retirement ago…and/or increase substantially the amount collected to fund them…either via state or private.

    • avatar

      you only quote the official propaganda… 1. Statistics are false. I’m sure there are the same guys counting votes and covid 19 victims stating the life expectancy is 80… 2. I’ve payed up to now the equivalent of 8 years of pension and I have more 10 years till retirement. My father died at 72. So I expect the same… With Covid (and other) vaxes, polution, all the stuff they put in us, the life expectancy is not 80, not even close! Maybe you belive them. I don’t…

    • avatar

      Ps…accept romania has a lower life expectancy (76 years)..but principle issue on affordability remains.

  10. avatar

    All pension systems in Europe have huge reserves enough for big increases and for many years.Ageing population is marvellous life increase and human achievement

    • avatar

      not sure what you’ve been smoking…all pension systems in western Europe are significantly underfunded and essentially rely on future contributions to pay current liabilities…if they were private companies, they wouid be
      declared bankrupt….right now, they are in essence a government run ponzi scheme

    • avatar

      Study and not publish fabricated stories of misinformation

  11. avatar

    I think that a big part of our generations have weak heath due to stress and pollution of all kind in spite of what is considered that we live longer. It is not fair to raise the pension’s limit age until these issues with general health of population are not fixed!
    We should not die at work!!
    By raising % of the buget for pension should be better than to raise the pension’s limit age.
    In Scandinavia, the pension age is unfortunately already set for 67 years old and probably in future it will be 70 years old.

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