Mind the Gap - Quantifying the pension savings gap in Europe

€2,010 trillion how much more European citizens need to save each year into their pensions to achieve an adequate retirement income We have updated our landmark Mind the Gap study of Europe’s pension savings gap from 2010. This latest research shows that Europe’s pension savings gap remains substantial, surpassing €2 trillion a year – equivalent to 13% of Europe’s GDP.

The study aims to provide a broad estimate to stimulate debate on the scale of the challenge and how to address this. Whilst the figures are only an indication and not a prediction, there are trends that can be seen. Hundreds of millions of people across Europe risk facing a shortfall in the pensions they need for a secure and prosperous retirement, unless action is taken now.

"Europe needs to save an extra €2 trillion a year to close the pension savings gap"

David McMillan, Chief Executive Officer, Aviva Europe

As European Governments grapple with public debt levels and the wider challenges of an ageing population, individuals will need to take greater responsibility for their own future income.

There are also clear steps that the EU and European governments can take to support people to save – particularly younger people who have the greatest opportunity to address their pension savings gap if they start to save early.

Explore the highlights of Europe’s pension savings gap on this website or download the full  Mind the Gap 2016 report  (PDF 1.7 MB) .

Watch the interviews

The results in a nutshell from Aviva senior executives

Country insights

Take a deep dive into the gap in eight different European countries

The generation gap

Explore what the pension savings gap looks like for different age groups

How to bridge the gap?

Read our recommendations for Government, regulators and industry

The gap explained

Learn more about how we have calculated the pension savings gap

Join the discussion

Get in touch to discuss the findings and how we can all play our part in bridging the gap

Watch the interviews

Aviva’s Andy Briggs and Ignacio Izquierdo present their summaries of Mind the Gap’s main findings.

Comments from Andy Briggs, Global Life Chairman

Download full transcript

Ignacio Izquierdo, CEO of Aviva Spain, explores the findings

Download full transcript

Country insights

The pension savings gap that each country may face depends on many factors including: the number of people retiring between 2017-2057, the amount people are due to receive from the state pension and the level and rate of private savings. 

Explore each country’s potential pension savings gaps in these country profiles: 

France
  • Number of people retiring 2017-57: 32.9 million
  • Annual pension savings gap (2010) €244bn
  • Annual pension savings gap (2016) €241bn

Find out more about the French results  or find your pension gap with Aviva France's pension calculator

Germany
  • Number of people retiring 2017-57: 40 million
  • Annual pension savings gap (2010) €469bn
  • Annual pension savings gap (2016) €461bn
Ireland
  • Number of people retiring 2017-57: 2.3 million
  • Annual pension savings gap (2010) €20bn
  • Annual pension savings gap (2016) €28bn

Find out more about the Irish results , where you can also find your pension gap with Aviva Ireland’s pensions calculator

Italy
  • Number of people retiring 2017-57: 25.3 million
  • Annual pension savings gap (2010) €98bn
  • Annual pension savings gap (2016) €99bn

Find out more about the Italian results  or find your pension gap with Aviva Italy's pension calculator

Lithuania
  • Number of people retiring 2017-57: 1.4 million
  • Annual pension savings gap (2010) €5bn
  • Annual pension savings gap (2016) €5.4bn
Poland
  • Number of people retiring 2017-57: 17.8 million
  • Annual pension savings gap (2010) €69bn
  • Annual pension savings gap (2016) €65bn
Spain
  • Number of people retiring 2017-57: 25 million
  • Annual pension savings gap (2010) €171bn
  • Annual pension savings gap (2016) €192bn

Find out more about the Spanish results  or find your pension gap with Aviva Spain’s pensions calculator .

United Kingdom
  • Number of people retiring 2017-57: 27.7 million
  • Annual pension savings gap (2010) €379bn
  • Annual pension savings gap (2016) €365bn

Find out more about the UK results  (PDF 587.7 KB) .

The generation gap

Aviva’s latest Mind the Gap analysis shows that younger people have the greatest opportunity to address their pension savings gap:

  • For example in Spain to plug the gap, on average a 20 year old could need to save an extra €2700 a year, whilst on average a 50 year old needs to save an extra €6500 a year to close the gap.
  • To know what’s right for each individual it will be important to find out what their own gap might be. New digital tools make it easier for people to engage with their pension by, for example, checking how much money they have or estimating their retirement income. 

We also had a look at how people have been feeling about the challenges facing them in retirement through Aviva’s regular Consumer Attitudes Survey. It showed that:

  • Half of people surveyed (50%) are worried they will not have enough money when they retire, but only a third (35%) are taking steps to address it.
  • In addition to their pensions, individuals plan to use a range of strategies to fund their retirement including their home and other properties.
  • A quarter-of Europeans surveyed (23%) are choosing to work beyond the normal retirement age, the majority citing financial reasons as the primary cause.

Read more commentary about the generational gap and consumer attitudes in Aviva’s latest  Mind the Gap report  (PDF 1.7 MB)

How to bridge the gap?

Governments, regulators and pension providers need to take a range of measures now to help individuals plan for the future.

We believe action could helpfully be targeted in four key areas: 

Stability

Pension systems need to be stable to incentivise saving:

  • pension reform should be evidence-based with political consensus
  • tax incentives need to be durable and understandable to win people’s trust
Access

With responsibility for saving increasingly shifting to individuals, governments can increase access to pensions and prompt people to save by:

  • introducing automatic enrolment with an employer contribution
  • where this exists sharing learnings and consider  building on scope, adequacy and engagement
Communication and Information

Governments should work with industry, the European Commission and EIOPA to improve pension information and prompt individuals to assess where they stand:

  • provide citizens with a consolidated view of their pension savings and share best practice
  • establish an annual pensions day / week
Capability

Individuals need skills and help to take decisions. Governments should:

  • introduce financial education into the national curriculum and share best practice
  • work with industry and partners to develop and share ‘rules of thumb’ to give people a sense of how much they need to save when 

Read more detail about our recommendations in the latest Mind the Gap 2016 report  (PDF 1.7 MB) .

The pension gap explained

There are a few definitions we’re using in our report that are helpful to explain in a bit more detail.

What is Europe’s pension savings gap?

It is how much more people who retire between 2017 and 2057 need to save each year to fill the gap between the pension they can currently expect to receive (from a possible combination of state, workplace and private pensions) and the amount people are likely to need for an adequate standard of living in retirement.

What do you need for an adequate standard of living in retirement?

We’ve defined this based on the concept of “replacement rates”.

What is a replacement rate?

It is the percentage of the income (after tax) that you earn just before you retire that you will continue to need in retirement.  Typically people do not need 100% as by this stage many people have paid off their mortgage and no longer need to save for their retirement.

Does everyone need the same?

We think this depends on how much you earn before you retire.  People on lower incomes may be more dependent on their salary for day-to-day living, so for the purposes of this report we’ve suggested its ideal they aim for a 90% replacement rate.  For mid-income earners we’ve said 65%.  High income earners will have higher levels of disposable income beyond their everyday needs, so for these people we’ve based our calculations on 55% of their final salary.

What about other types of income or savings?

We’ve focused here on pensions as they’re specifically designed to help people fund their retirement.  It’s important to understand just how much you may need to save to plug any potential shortfall.  To address this people’s plans may also then include assets such as property, investments or cash deposits – the critical thing is to think ahead for the future and that’s what we hope this report will prompt people to do.

For the full methodology download the  Mind the Gap 2016 report  (PDF 1.7 MB) .

Join the discussion

Join in to share your thoughts on Europe’s pension savings gap on Twitter with #Savesmarter.

If you have any questions, please do get in touch with our public policy team on public.policy@aviva.com.