Europe has a significant annual pensions gap of €1,9 trillion, which cannot be closed by one single lever on its own, Aviva has revealed.

Pensions gaps vary substantially between countries. In absolute terms the largest shortfalls are in Western European countries – the UK, Germany, Spain and France – as they have larger populations and will therefore see more people retiring. These countries also have some of the highest pre-retirement income across Europe which means that pensions in those countries are estimated to be higher as well.

In Central and Eastern Europe these numbers are smaller, possibly because of the effect of recent reforms to their pension systems specifically designed to address issues of adequacy and sustainability. However, informal earnings, which Aviva has excluded from their analysis, would make the pensions gap almost 60% larger.

In the UK, the annual pensions gap per person is €12,300, which means that this is the amount each person retiring between 2011 and 2051 needs to save every year to close their personal pensions gap. In Germany this number is €11,600 and in Ireland €9,100. In Eastern Europe these numbers are less, with €1,900 for Hungary, €3,700 for Romania and €4,600 for the Czech Republic.

The European annual pension gap is currently €1,9 trillion, which is the equivalent of 19% of 2010 GDP and is higher than the estimated costs of the recent economic crisis. No single lever can close the gap entirely on its own. Getting on by 50% of pre-retirement income leaves a pensions gap of €669 billion, while increasing the national retirement ages leaves a gap of €841 billion.

Andrea Moneta, CEO of Aviva EMEA, said: “Policies adopted by national governments to start to address this range from modest increases in the state retirement age, a shift towards defined contribution schemes, and the introduction of mandatory or voluntary private pension schemes for all workers. These are positive steps, but governments still face ever-increasing pressure on public pension provision. This has been further exacerbated by the recent financial crisis and means that individuals will have to take increasing responsibility for providing for their own future.”

The pensions gap shows the difference between the pension provision that people retiring between 2011 and 2051 will need for an adequate standard of living in retirement and the pension amount they can currently expect to receive, expressed as an annual amount.

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