Subjective Well-Being in Retirement, Public Pensions and Income Inequality in Europe

Claudius Garten , Federal Institute for Population Research (BiB)

The purpose of old-age security is to provide material security in old age. Public pensions account for the largest share of old-age security in European welfare states and thus offer considerable scope for social policy. In addition to its function of providing material security, public pensions also have a symbolic meaning as social recognition of individual ‘life achievement’, which is strongly linked to gainful employment. Thus, public pensions can contribute to subjective well-being in retirement and decrease cumulative disadvantage. This paper focuses on the conditions under which public pensions contribute positively to subjective well-being in retirement and how this depends on individual socio-economic position and the income distribution. The study uses panel data from the Survey of Health, Ageing and Retirement in Europe (SHARE) from 2006 to 2022 of pensioners from 25 European countries including employment histories from SHARELIFE, which show the years of occupation in different skill levels as well as different status outside of employment. In addition, information on income inequality by the OECD is included in the analysis. Multilevel models with country fixed effects are estimated. For those who were more likely to be economically inactive before retirement due to illness or disability, subjective well-being at retirement is higher if they receive a larger share of income from public pension benefits, irrespective of the level of income inequality in later life. To ensure a higher subjective well-being in later life for everyone, future pension reforms should take into account its effects on poverty prevention in old age.

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 Presented in Session P5. Health, Mortality, and Ageing 1