CAN EUROPEAN PENSION SYSTEMS SURVIVE DEMOGRAPHIC AGING? EVIDENCE FROM EU27 COUNTRIES
CAN EUROPEAN PENSION SYSTEMS SURVIVE DEMOGRAPHIC AGING? EVIDENCE FROM EU27 COUNTRIES
Muhammad QASIM, Levente NÁDASI, Zsuzsanna TRÓN
Institute of Economics, Faculty of Economics and Business, University of Debrecen, Hungary (student)
Institute of Economics, Faculty of Economics and Business, University of Debrecen, Hungary
Institute of World Economics and International Relations, Faculty of Economics and Business, University of Debrecen, Hungary
qasim295@mailbox.unideb.hu
nadasi.levente@econ.unideb.hu
tron.zsuzsanna@econ.unideb.hu
Abstract: The sustainability of public pension systems has become an increasingly important issue in the European Union due to demographic aging, declining fertility rates, and rising life expectancy. These demographic trends are gradually increasing the old-age dependency ratio, thereby placing growing financial pressure on pay-asyou-go pension systems that rely on contributions from the working population. This study examines whether public pension systems in the EU can remain financially sustainable under current demographic conditions. Using a quantitative and comparative research approach based on panel data for EU27 countries, the study analyses key demographic, economic, and institutional variables, including life expectancy, pension expenditure, replacement rates, and retirement age patterns. The analysis is supported by trend evaluation and cross-country comparisons, allowing for the identification of both temporal developments and structural differences between member states. The findings indicate a clear upward trend in the old-age dependency ratio, reflecting a growing imbalance between contributors and beneficiaries. Additionally, pension expenditure is rising in many countries, increasing fiscal pressure on public finances. The results also highlight a persistent gap between statutory and effective retirement ages, which further weakens system sustainability. Differences across country clusters reveal that while some systems struggle with financial sustainability, others face challenges related to adequacy and equity, particularly concerning the gender pension gap. The study concludes that there is no universal solution, and effective policy responses must balance sustainability, adequacy, and fairness. Ongoing reforms, including increasing retirement age, promoting labour market participation, and developing multi-pillar pension systems, are essential to ensure the long-term stability of pension systems in aging European societies.
Keywords: Pension Systems; Old-Age Dependency Ratio; Demographic Aging; Fiscal Sustainability.
JEL Classification: H55; J11; J26.
