European pension system. What do you need to know?

The concept of “pension” has existed for many centuries. Every country values its pensioners and knows how best to take care of them. As a result, two main pension systems have developed in the world:

One-time – taxes from working people are used to pay pensions to the current generation of pensioners.

Accumulative – people themselves are responsible for their future pension by making contributions to a non-state pension fund when they start working.

Let us give an example of retirement and the pension system on the example of three European countries.

Pension systems in Europe

Pension systems and retirement ages in Europe vary from country to country.

EU countries have their own rules for retirement, with different principles determining retirement age and pension amounts, and different funding sources.

A lot of it depends on the country's circumstances and, of course, the life expectancy of the population. The government has been able to gradually raise the retirement age due to the fact that people are living longer.


Pay-as-you-go pensions play a big role in Finland's pension system. The pay-as-you-go pension is divided into a basic part and an insurance part.

The basic part guarantees a minimum amount of public pension.

The insurance part is decentralized and consists of contributions to selected schemes from insurance companies or pension funds. These schemes include sectoral schemes, company schemes, and social organization schemes.


Like many other European countries, France's public pension system is divided into two tiers: basic and contributory. The average salary in France is taken into account when calculating the basic pension amount. The accumulated pension is determined by the amount of bonuses that the company distributes to future pensioners after termination of employment.

All working French people contribute 16% of their wages to the pension fund. For regular employees, the employer pays half, but representatives of creative professions and entrepreneurs pay the full amount themselves.

Taking inflation into account, the basic pension is usually calculated as 50% of the average salary of the 25 most economically successful years. Taking into account savings in a private pension fund, the French can receive up to 80% of their salary.

The retirement age in France is 62.5 years old for both men and women, with an average life expectancy of 82 years. However, the government has drafted a new law that will raise the retirement age to 67. It will be fully implemented by 2023.

In France, there are some additional indicators to consider in order to receive a large pension. For example, at least 40 years of work experience, which means you need to have worked on active duty for almost your entire life. However, not everyone is able to do that, so there are both increasing and decreasing factors. For example, if you've reached the age of 62 and still don't have enough years of service, you can still get an old-age pension, but there's a 5% penalty factor for every year of service you don't have. The maximum is 25%.


According to the United Nations, German pensioners have the third-highest standard of living, after Sweden and Norway.

The pension system is based on the principle of intergenerational solidarity, where workers contribute to a national fund for the maintenance of pensioners and receive a pension from it. The more you contribute now, the greater your right to receive a pension later.

On average, German citizens contribute about 20% of their monthly salary to the pension fund, half of which is paid by their employer. The state pays during a man's military service or a woman's maternity leave. The pension formula itself is based on coefficients accumulated during active service. This factor depends on the retirement age (67 in Germany), years of service, salary, and type of pension.

The government guarantees payments from the budget for those earning no more than €3,900. Germans earning more than that enter into a voluntary agreement with a private fund. They voluntarily contribute a certain amount to their pension.

Germany has strict laws against tax defaulters. If a person doesn't work anywhere or has been working formally for less than five years, the state doesn't pay them a pension. Immigrants are heavily affected by this problem.


The pension system in most countries in the world consists of two parts: public pensions and contributory pensions. It has been proven that the majority of future pensions will eventually consist of private pension payments, while public pension payments are usually the state's minimum guarantee, i.e. an emergency allowance.

The accumulative pension system, especially voluntary individual contributions, will ultimately be the basis for the formation of pensions everywhere!


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