State spending on pensions currently reaches 13% of GDP in Portugal, on par with countries such as Austria (14.8%), France (13.8%) and Finland (13.7%), according to an OECD report released this Thursday, 27th.
In these three countries, public pensions absorb between a quarter and a third of total public expenditure. In Portugal, they currently account for 27.3% of expenditure, according to the study “Pensions at a glance 2025”, by the Organization for Economic Cooperation and Development (OECD).
Greece and Italy are the OECD countries where the burden of public pensions is highest, reaching around 16% of GDP.
At the other extreme are Australia, Chile, Iceland, Ireland and South Korea, with spending less than 4% of GDP on public pensions, although for different reasons.
While Chile and Ireland have relatively young populations, in Australia and Iceland an important part of pensions is supported by private schemes and the retirement age, at 67, is considered “high”.
In Korea, the public social security system “is not yet consolidated” as it was only established in 1988.
On average, public pension spending in the 38 OECD countries increased from 6.7% to 8.1% of GDP between 2000 and 2024, the last year analyzed in the report.
But in Portugal, Finland, Greece, Mexico and Spain, spending has risen by more than four percentage points of GDP since 2000, and between two and four percentage points in Italy, Japan, Korea and Turkey.
In Portugal, the increase was around five percentage points of GDP, going from 7.8% in 2000 to the current 13% of GDP.
On the other hand, public spending fell by more than one percentage point in Australia, Chile and Latvia, with Germany, Ireland, Lithuania and the United Kingdom also showing slight declines.
Despite the pressure of an aging population, public spending on pensions is stable in 15 countries: Canada, Estonia, Germany, Hungary, Iceland, Ireland, Israel, Lithuania, the Netherlands, New Zealand, Poland, Slovenia, Sweden, Switzerland and the United Kingdom.
By 2050, the OECD predicts that public pension expenditure will grow between 8.8% and 10% of GDP, on average, across all 32 OECD countries.
In the EU27, GDP is projected to rise from 9.9% in 2023 to 10.9% of GDP in 2050, despite an estimated 69% increase in the number of people over 65 years of age.
Portugal (-2.8 percentage points) and Italy (-1.7 percentage points) are the two countries that are expected to show the biggest drops in public expenditure on pensions between 2050 and 2060, the limit year of OECD projections.
According to the report, private pensions are mandatory or achieve “almost universal coverage through industrial relations agreements” in less than a third of the 38 OECD countries.
In the remainder, voluntary private pensions are set up on an individual initiative or are offered by the employer, meaning that “around half of OECD countries have private pensions” with some degree of importance.
Iceland, Switzerland and the United States have the “largest flows of private pension payments”, with a weight of 5.2% and 5.7% of GDP. This is followed by Australia, Canada, the Netherlands and the United Kingdom, with an expression of 3.% to 4.5% of GDP, and Japan with 2.7% of GDP.
In Portugal, private pensions are equivalent to just 0.3% of GDP, one of the lowest values among OECD countries.
In Iceland, private pensions represent 64% of total pension expenditure, while in Australia, Switzerland and the United States they account for 50% of the total. On average, the value is 18% of total expenses.
Total expenditure on both public and private pension systems is highest in Italy, reaching 16.6% of GDP. This is followed by Greece with 16.3%, Austria with 14.6% and France with 13.7%. In Portugal it is 13.3% of GDP.
The average among OECD countries is 9.4% of GDP, with the lowest levels found in Ireland, with 3.8% of GDP, and Korea, with 4.7%.