OECD: Mandatory pensions fall short in 22 European countries

Mandatory Pensions Fall Short Across Europe as OECD Flags Massive Contribution Gaps

Mandatory pension systems are projected to fall short of the Organisation for Economic Co-operation and Development’s retirement income target in 22 of the 30 European countries studied in the OECD Pensions Outlook 2026. Employees on average wages face a steep contribution gap, requiring substantial voluntary savings over a full career to retire on 70% of their gross pay.

The Bottom Line:

Lithuania has the biggest gap as a share of earnings at 20.7%, while Switzerland requires the highest estimated monthly voluntary contribution at more than €1,000 for men on average wages.
Mandatory pensions are expected to meet the OECD’s retirement income target for men on average wages in eight countries: Austria, Denmark, Greece, Italy, Luxembourg, the Netherlands, Portugal, and Spain.
Among major economies, the contribution gap sits at 11.1% in Germany, 9.1% in the UK, and 6.2% in France.

The Anatomy of the European Retirement Shortfall

Stéphanie Payet, a policy analyst at the OECD, noted to Euronews Business that income needs depend heavily on expected spending. “There is no universal retirement income objective.”

Contribution gaps vary from 0.4% in Turkey to 20.7% in Lithuania among male employees with average earnings.

Applying the OECD contribution rates to 2025 average gross wages reveals stark nominal differences in what workers must set aside monthly.

Estimated extra contributions for men range from about €5 a month in Turkey to €1,084 in Switzerland.

Meanwhile, workers in the UK face a necessary monthly savings rate of approximately €494, compared to €360 in Poland, €238 in France, €64 in Slovakia, €68 in Bulgaria, €91 in Sweden, €111 in Romania and €129 in Hungary.

Average gross monthly earnings in 2025 ranged from €1,549 in Turkey to €8,957 in Switzerland, with Germany recording €5,558, the UK €5,445, Sweden €4,195, France €3,830, Poland €2,078 and Hungary €1,772.

Structural Divergence in National Welfare Models

Discrepancies in contribution gaps stem directly from projected income yields within mandatory state systems.

This baseline disparity sits against broader Eurostat data showing that EU spending on old-age pensions in 2023 averaged about €1,440 a month per beneficiary, a figure covering people already receiving a pension, including those with shorter careers.

Voluntary Savings Leave Lower Earners Vulnerable to Retirement Poverty

Voluntary retirement savings remain acutely vulnerable to behavioral economics and market realities. Professor Traute Meyer highlighted the risk of poverty in retirement, noting that research consistently shows voluntary retirement saving is insufficient, especially among lower earners. “People underestimate future needs, prioritise current demands, distrust private schemes or lack the means to save,” Meyer told Euronews Business.

Because the OECD contribution gap is a forward-looking metric based on expected replacement rates for workers entering the labour force today, structural changes could alter the economic conditions before younger cohorts reach retirement age. Professor Marek Góra of the Warsaw School of Economics emphasized that prospective policy shifts, such as scheduled increases in retirement ages, would reduce the need for extra savings, while lower replacement rates would increase it.

Disclaimer: The information provided in this article is for educational and market analysis purposes only and does not constitute financial, investment, or legal advice. Always consult with a certified financial professional before making investment decisions.