That's how much money German pensioners have compared to their European neighbors

Created: 09/20/2022, 08:11

By: Franziska Kaindl

After retirement, German retirees usually only have a fraction of their previous income.

How is it in other countries?

How much pension ends up in the account each month after retirement depends on various factors in Germany - but one of the most important is the wage during the employment.

The so-called standard pension (or corner pension) shows how much a model insured person would receive in monthly pension in Germany if they had paid contributions for an average salary for 45 years and had not retired before reaching the standard retirement age.

In 2022, the basic monthly pension will be EUR 1,538.55 in the West and EUR 1,506.15 in the East – gross.

With the current price explosions on the market, today's employees see this as little money to live on.

However, everyone's individual life situation is different.

The pension levels in different countries are always compared with one another.

But is the grass really greener on the other side of the hill?

Europe comparison: how much old-age pension remains compared to the previous salary?

Basically, it is difficult to compare the pension and economic systems of different countries.

Roughly speaking, there are two basic types in Europe: On the one hand, the so-called "Bismarck pension system", in which the current payments of the pensions are covered by the current contribution income of the employed person.

And on the other hand the "Beveridge pension system", in which the basic security is financed from taxes and is usually supplemented by a mandatory company pension.

There are also “mixed types” from both systems.

Pensioners sit on a bench in the Grimmeshörner Bay in Cuxhaven.

© Rust/Imago

In a 2021 report, the Organization for Economic Co-operation and Development (OECD) compares net replacement rates to find out how much disposable income citizens of different countries have left after retirement compared to earnings while working.

The net replacement rate is defined according to the OECD as “an individual's net pension entitlement divided by net pre-retirement earnings, taking into account income taxes and social security contributions owed by workers and retirees”.

It therefore describes the ratio of the old-age pension to the net salary that was earned before retirement.

It is important to note that this is a theoretical model calculation that does not reflect the actual pension levels in the countries.

Rather, they relate to the assumed pension of a 20-year-old who entered the labor market in 2020, as OECD spokesman Niklas Bartholmeß has already clarified to CORRECTIV.

Here is the net replacement rate in European countries in the 2021 OECD report:

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Source: OECD

Net replacement rate in Germany lower than elsewhere – but not necessarily meaningful

On average across OECD countries (including non-European countries), the net replacement rate for an average earner of normal retirement age is 62.4 percent.

This puts Germany below average with a net replacement rate of 52.9 percent.

Within Europe, only Switzerland, Ireland, Poland, Estonia and Lithuania are among them.

However, the data should also be treated with caution: The net replacement rate alone does not say anything about how pension payments look in absolute terms in the countries.

So German pensioners don't necessarily have to be poorer than those in other countries.

Various factors such as the cost of living, for example, are not taken into account at all.