Pensions in the European Union amount to about three-fifths of late-career earnings. In many European countries, this ratio falls below 50%, making it difficult for retirees to maintain a decent standard of living. The purchasing power of an Albanian pensioner is the lowest in Europe.
Albanian pensioners also rank among the last in Europe regarding the ratio of pensioner to income at the end of their career. This means that if an individual aged 50-59 has earned 500 euros, they will only receive 37% of that payment in retirement. In many European countries, pension income is much lower than pre-retirement earnings.
This makes it difficult for many older people to maintain their standard of living after retirement. Almost one in six pensioners in the EU is at risk of poverty, with the rate rising from 12% in 2013 to 15.5% in 2023. Eurostat uses a total replacement coefficient to assess the effectiveness of pension systems.
This indicator indicates whether pensions enable older people to maintain their standard of living after retirement. It compares the average retirement income of individuals aged 65–74 with the average working income of people aged 50–59, excluding other social benefits. This helps to understand whether pensions are adequate.
In 2023, the replacement rate in the EU was 58%. This means that a person who earned 100 euros between the ages of 50–59 would receive 58 euros in retirement between the ages of 65–74. In the EU, this ratio ranged from 35% in Croatia to 78% in Greece.
Spain (77%) and Italy (75%) followed Greece at the top, while Portugal also exceeded the EU average with a ratio of 61%. At the bottom of the ranking, Lithuania (36%) and Ireland (39%) followed Croatia. In Albania, the replacement rate is 37%, making Albanian pensioners among the poorest in Europe and the poorest in the region.
Germany had the lowest pension ratio to late-career earnings among the four largest EU economies, at just 49%. Meanwhile, France (59%) stood just above the EU average.
Albanian pension replacement rate ranks lowest
On the other hand, Spain and Italy ranked among the top three countries, with rates above 75%. In 11 EU member states, pensions accounted for less than half of people’s average income at the end of their working lives. Some of these countries were Germany (49%), Belgium (48%), and Denmark (47%).
Among EU candidate countries, Serbia (46%), Montenegro (38%), and Albania (37%) also had lower pension income replacement rates. The General Replacement Rate also varies by gender. In the EU, men (60%) receive three percentage points more than women (57%).
Even in Albania, the coefficient for female pensioners is lower than that of men. In some European countries, the retirement income replacement ratio was higher for women than for men. For example, in Germany, pensions accounted for 54% of late-career work income for women, compared to 46% for men.
This trend was also observed in Denmark and Ireland, where the ratio was six percentage points higher for women. On the other hand, Spain and Portugal are the countries with the most disadvantages for female retirees. In Spain, the replacement ratio was 63% for women, much lower than the 83% for men.
Similarly, in Portugal, women had a 50% ratio, compared to 71% for men, meaning that female pensioners received 30% less than men. Significant differences in pensions are observed across Europe. In 2021, the average gross monthly expenditure on old-age pensions per beneficiary ranged from €226 in Bulgaria to €2,575 in Luxembourg.
The EU average was €1,294. In nominal terms, Western and Northern European countries have the highest pensions, while Eastern and Southeastern Europe spend much less on pensions per person. The gap narrows when pensions are adjusted according to purchasing power parity (PPP), ranging from €437 in Bulgaria to €1,681 in Luxembourg within the EU.
Western and Northern European countries continue to have the highest pensions, while Eastern European and Balkan countries report lower figures. In particular, Switzerland’s ranking drops significantly when calculating pensions according to purchasing power standards (PPS), while Romania and Turkey improve significantly compared to their rankings for nominal pensions. The purchasing power of an Albanian pensioner is the lowest in Europe.