5. Financing the Pension System
Pensions represent a very large and rising share of public expenditure. In the EU as a whole, average pension expenditure is projected to account for more than 12% of GDP in 2060; there are, however, large differences across countries. Public pension schemes differ in the way that they are financed: either by social contributions or by general government contributions. The social contribution rate is shown as a percentage of gross earnings and can be divided into contribution rates by the employee and the employer. Total contribution rates as a percentage of gross earnings vary significantly across countries. Apart from public pensions, private pensions contribute to the pensioners’ overall retirement income. Various private pension funds exist across countries.