Introduction

The different sources of old-age provision

Did you know that your pension benefits from within Europe will come from different sources?

Maybe you’ve noticed some differences already while moving around: All countries in Europe have got their own pension landscape consisting of different sources, tiers and levels being as diverse as the European States themselves.

In order to give you orientation within the different pension systems you may have earned pension benefits, this page will provide you with very basic information on

  • how the European countries’ pension landscapes are composed
  • and what that means for you.

In Europe, pension schemes can be described by classifying three main roles, purposes and settings. You will recognize them by the icons below:

Statutory Pension

It is seen as the basic part when it comes to pension provision and can be found in all European countries. Most likely the state pension system will be seen as part of the states’ social security system.

Depending on the respective social security outlines, this can include contributing to the national statutory (pension) insurance being compulsary for all who are in employment or self-employed for instance. In some European countries it might even be compulsory to all residents, regardless of their income. In most cases the benefits from this scheme are paid in case of

  • old-age,
  • incapacity or illness,
  • death (for surviving spouses, partners or orphans).

In some countries, the state pension scheme is composed of different elements e.g.

  • a basic, flat-rate or non-contributory part and
  • an earnings related or contributory part.

Occupational Pension

Occupational pension schemes are an additional source of pension provision. They have to do with you being part of an employment relationship. Therefore, they are also used as company pension and depicted by an office building here. In most countries they are not mandatory by law like the state pension provision.

 

Occupational or company pensions are usually set-up by the employer and can be compulsory or voluntary. However, in some countries, the occupational pension provision is similar to the earnings-related state pension schemes and even seen as part of a social security. Occupational provision is often based on collective bargaining agreements and covering certain occupational groups. Therefore, employers or social partners, in one way or another, take part in the governance of occupational schemes.  

Private Pension Savings

This is the 3rd source of pension. The icon used is that of a private house because this source is completely voluntary and done privately by each individual.

Due to its additional and individual character, contributions and premiums are only paid by the citizens on their own. In order to foster additional saving for the old ages, many states promote additional pension saving. This can be done through tax reliefs up to a certain limit or subsidies for instance. There are many different ways of private pension saving likestocks and shares,

  • life insurance
  • bank plans or pension funds

all being managed by private institutions, e.g. private pension funds or life insurance companies. The risk of low yields and returns is taken by the savers according to the terms and conditions and applicable law.