In most European countries, the average income of people over 65 is lower than that of the total population, according to the OECD. In several cases, elderly incomes fall below 80% of the national average, contributing to significantly high poverty rates among pensioners.
So, how do these levels of financial precarity vary across Europe? In which countries do pensioners face the highest levels of poverty? And how does elderly income compare to the national average?
Income poverty rates measure the proportion of people at the lower end of the income distribution scale. Specifically, the poverty rate refers to the share of the population whose income falls below the poverty line. According to the OECD, this is defined as 50% of the median household income of the total population.
For example, in 2022, the median disposable household income in France — adjusted for household size — was €26,410. This means the poverty line stood at €13,205.
In 2022, the pensioner poverty rate across 30 European countries ranged from 3.1% in Iceland to 37.4% in Estonia, measuring the share of people over 65 with incomes below half of the median household disposable income.
Eastern vs Northern Europe
Pensioners tend to be more financially vulnerable in Eastern Europe, particularly in the Baltic states and several post-communist countries.
Following Estonia, the highest pensioner poverty rates were recorded in Latvia (33%), Croatia (28.5%), and Lithuania (24.6%).
Pensioner poverty rates tend to be lower in Western and Northern Europe. Iceland (3.1%), Norway (4.1%), Denmark (4.3%) and Finland (5.5%) have some of the lowest rates. These countries benefit from strong welfare systems and universal pension schemes.
However, Switzerland (19.8%) and the UK (14.9%) stand out with relatively high pensioner poverty rates.
Among Europe’s five largest economies, the UK has the highest rate, followed closely by Germany (14.1%) and Spain (13.1%).
Italy performs slightly better at 12%, while France stands out with the lowest rate by far — at just 6%.
In general, the female pensioner poverty rates are much higher than those for men, partly due to higher life expectancies.
Key factors behind pensioner poverty
“Low pension payments are the main contributing factor to pensioner poverty,” Andrew Reilly, pension analyst at the OECD, told Euronews Business.
“Even with relatively long working careers, pensions are low in Estonia, Japan, Korea, Latvia and Lithuania.”
Reilly noted that these countries have some of the highest rates of pensioner poverty.
“In the Baltic states, the high poverty rates are the result of low earnings-related pensions and relatively low safety-net benefits,” he added.
The strength of first-tier pensions — also known as state pensions — can lower poverty rates amongst older citizens by providing a guaranteed minimum income.
“Those countries that have large safety-net benefits for pensioners, whether targeted only to the poorest or universally paid to all, tend to have lower levels of poverty amongst the older age groups compared to the overall population figures e.g. Denmark, Iceland, and Norway,” Reilly said. He added that Latvia and Lithuania have low levels of safety-net benefits.
Elderly income compared to the national average
The average income for people over 65, when considered as a percentage of the total population’s average income, varies significantly across Europe.
In 2022, it ranged from 66.3% in Estonia to 107% in Luxembourg. This means that in Estonia, older adults received just two-thirds of the national average income.
Among 29 countries, the income ratio for people over 65 falls below 80% in several cases. These include Lithuania (66.5%), Latvia (71.4%), Croatia (73.4%), Belgium (76.2%), Czechia (76.7%), Bulgaria (77.2%), and Switzerland (79.4%).
At the top of the list, Luxembourg leads with 107%, followed by Italy (98.8%), Portugal (97.1%), and Spain (96.7%).
Among Europe’s largest economies, Italy and Spain have the highest elderly income ratios, closely followed by France at 94.3%. The UK stands lower at 82.1%. Despite Germany’s high pensioner poverty rate, the elderly income ratio there still reaches 90%.
For example, in 2022, the mean disposable household income in France — adjusted for household size — was €30,500. People over 65 received an average of €28,750.
This ratio can fluctuate significantly from year to year in some countries. For example, in Turkey, it was 97.3% in 2019. It then rose to 103% in 2020, and it dropped to 84.5% by 2022.
Purchasing power
On the other hand, the OECD’s Pensions at a Glance 2023 report notes that “these numbers are based on income data, and the considerable country differences in wealth (housing or otherwise) held by older people may not be reflected in income poverty rates”.
In other words, both the amount of pension income and its purchasing power should be considered when assessing which countries offer the best conditions for retirement.