What it is and why it matters
Why many Europeans may not have enough retirement income — and what can help
People live longer than in the past. This is good news. But it also creates a new question: will people have enough money when they stop working?
For many people, the answer is not clear. This problem is called the pensions gap. It means there is a difference between the money people will need in old age and the money they are likely to receive.
Learning about this early is important. When people understand the problem sooner, it is easier to prepare.
What is the pensions gap?
For example, if someone needs €1,500 a month to live after retirement but only receives €1,000, the difference is part of the pensions gap.
The pensions gap is the difference between:
In simple words: many people may not have enough money when they are old if nothing changes.
The size of this problem is very big. Around the world, the gap is about US$1 trillion every year and is expected to grow as people live longer.
US$1trn
Estimated annual global pension gap
(Source: 2023 GFIA report "Global protection gaps and recommendations for bridging them")
Why is the pensions gap growing?
The main causes are longer life expectancy, fewer workers for each retiree, and low personal saving. There are several reasons why this problem is getting worse.
People live longer
Today, people often live to an older age. This means their pension money must last much longer than before.
Fewer workers, more retired people
Public pensions use the money of today’s workers to pay today’s retirees. Because people have fewer children and live longer, there are fewer workers and more retired people. This puts pressure on pension systems.
Many people do not save early enough
Many people:
Pensions can be hard to understand. When people do not know much about money, planning is difficult — especially for young people, even though saving early helps the most.
In the EU, more than one in three people do not save for retirement at all. Among young adults aged 18–35, about 40% do not save for their pension.
The solutions
There is no single solution — individuals, national governments and the EU need to take action.
Pension gender gap
Women in Europe receive, on average, 29% less in retirement than men, mainly due to shorter careers, fewer hours and lower wages.
Insurance Europe’s third Pan-European Pension survey results confirm that there is a persistent gender gap in pension protection:
This is a significant issue for individuals, society and the economy.
This was discussed during 2023’s European Retirement Week and Insurance Europe also promotes pension saving through its InsureWisely financial literacy initiative.
How can we help?
We participate in European Retirement Week
Find out more about our #InsureWisely financial education initiative
Other resources
How can we cope with Europe’s demographic challenge?
1. Governments should introduce (or enhance) funded pension pillars (ie occupational and personal pensions) alongside the traditional PAYG statutory pension systems to improve their sustainability and the adequacy of retirement incomes.
2. The design of the multi-pillar system is key. To be successful, pension pillars must be mutually reinforcing and have clear roles and objectives (eg poverty prevention, income replacement).
How can we get people to save enough?
1. Policymakers should ensure that European citizens are informed about their expected future statutory pension entitlements.
2. Member states should take action to increase the uptake of supplementary pensions, introducing enrolment systems suited to local circumstances.
3. Member states should adopt tax configurations that incentivise citizens to save for the long-term, eg by deferring the point of taxation.
4. Member states should introduce or maintain tax incentives for supplementary pensions. These should be simple, stable over time and incentivise adequate saving over the long-term, eg by penalising early exit/surrender.
5. Digital distribution can increase private pension coverage and should not be hindered.
How can we get people to save well?
1. Savers should be informed about the importance of the asset mix in achieving their goals for income in retirement.
2. Policymakers and the insurance industry should work together to facilitate the offering by insurers of well-designed collective mutualised investment products for those savers that need them.
3. Solvency II’s treatment of long-term investments should move from a trading to a long-term approach, so that measurements are appropriate and not unnecessarily excessive.
4. Against the background of increasing longevity risk, policymakers must ensure that consumers can access decumulation products that best suit their needs, while reflecting national practices (eg life-long annuities, drawdowns, lump sums).
How can we get people to save wisely?
1. Financial education and awareness
a) The European Commission and member states should favour the adoption of national strategies for financial education and their inclusion in school curricula in order to develop financial literacy and responsibility from an early age.
b) A Commission-led European Day of Financial Education for sharing best practice and new approaches to financial education at national and EU level should be introduced.
c) EIOPA should review and coordinate financial literacy and education initiatives by national authorities.
2. Any EU initiative on pension product information should respect local market characteristics, be suitable for current and future distribution channels and be thoroughly tested with consumers. Consumers should be able to freely decide in which format they wish to receive the information and have equal access to both digital and paper means.
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