A report from the Finnish Centre for Pensions (ETK) has investigated pension contribution levels across eight European countries, with overall contribution levels being on average 14.6 per cent of GDP in 2020.

Sweden and Finland were found to have the lowest levels of contribution income, at 12.1 per cent and 12.5 per cent of GDP, respectively, when all contribution income paid by employees, employers, the self-employed and the state is taken into account.

The highest overall contribution level of the eight countries surveyed (Denmark, Finland, France, Germany, Italy, the Netherlands, Norway and Sweden) was found in Italy and Denmark, where the level was 16.8 per cent and 16.7 per cent per cent of GDP, respectively.

Employers’ contributions typically accounted for the largest share of contributions, at approximately 50 per cent of total contribution income.

The employers’ share was largest in Sweden at over two-thirds, while it was lowest in Denmark at just over a quarter.

Tax revenue accounted for around 30 per cent of total contribution income in the eight countries assessed.

This figure was highest in Denmark at 60 per cent, but tax revenues also accounted for a “significant share” in Germany and Italy.

Employees generally had the lowest share of pension financing, at around 20 per cent on average.

The contribution of employees was highest in the Netherlands (30 per cent) and lowest in Denmark (10 per cent).

“The comparison provides a good overall picture of the price of pensions in the countries included in the comparison, regardless of the structural differences in pension provision,” commented ETK liaison manager, Mika Vidlund.

“If only statutory contributions were compared, Finland’s contribution level would seem much higher.”

ETK noted that several factors affect the contribution level: Population structure, use of pension assets, pension levels and effective retirement age.

Sweden and Finland were found to be preparing for an ageing population by funding part of the pension contributions, while Finland had deferred retirement “considerably” in the 2010s.

All countries included in the comparison had curbed the growth of pension expenditure by adjusting pensions to the change in life expectancy.

Contribution levels were smaller in Sweden and Finland because of the pension benefit levels in these countries, which are at the EU average but lower than most other countries included in the comparison, with Denmark and Italy at the other end of the scale.

“The Danish national pension, financed by the state, is generous and paid to all,” said ETK senior adviser, Antti Mielonen.

“The high Italian contribution level is explained by an ageing population, high benefits and limited funding.”

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