Both at the EU and euro area level, public pension expenditure would start to increase from the 2020s and hit a peak of 12% of GDP for the EU in 2040, and 13.5% of GDP for the euro area.
Spending would then drop to slightly below the starting point of 11% of GDP for the EU by 2070, according to the 2018 Ageing Report, which is the joint work of a unit in the Economic Policy Committee and the Commission’s department for Economic and Financial Affairs.
This expenditure trajectory would vary between countries, however, depending on factors such as the degree and timing of population ageing, economic growth prospects, and progress with structural reforms.
According to the Commission, pension reforms – increases in the retirement age and changes to the parameters of pension systems, such as indexation – had made it possible to stabilise public pension spending as a share of GDP over the long term.
As a result, the public pension benefit ratio – which describes the average public pension in relation to the average wage – was forecast to fall by 10.6 percentage points on average in the EU.
In member states with supplementary private pension schemes, the total value of pensions relative to average wages was projected to be 10.5 percentage points higher than in member states without.
The ageing report looks at the long-run economic and fiscal implications of Europe’s ageing population, and is published every three years. According to the Commission, it complemented the analysis in the pension adequacy report.
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