3. Benefits – Values and Replacement Rates
The value of benefits provided under different types of schemes varies across countries due to the existence of different and multiple pension programmes. Generally, values can be presented in both absolute and relative terms, i.e. as a percentage of average worker earnings. Replacement rates indicate the ratio of pensions to earnings. The gross replacement rate is defined as gross pension entitlement divided by gross pre-retirement earnings. The net replacement rate is defined as the individual net pension entitlement divided by net pre-retirement earnings, taking into account personal income taxes and social security contributions paid by workers and pensioners.