Europe facing pensions crisis

EUROPE faces a pensions time bomb with the estimated gap between what people are saving for retirement and what they will actually need to live comfortably when they retire estimated at €1.9 trillion (£1.6 trillion), a report claims today.

Europe’s annual “pensions gap” is equivalent to 19 per cent of the European Union’s (EU) GDP for this year, according to the report published by insurance giant Aviva today.

At a country level the UK, France, Germany and Spain have the largest national pensions gaps. The UK’s annual pension gap was equivalent to 26 per cent of GDP, added Aviva.

Aviva suggests the gap is so severe that an increase in the state retirement age of up to ten years, working beyond retirement or a substantial reduction in living standards may be inevitable.

The report came as pensions minister Steve Webb warned there would be a dramatic rise in the number of pensioners in 2012, putting even greater strain on the public finances.

The Department for Work and Pensions estimates 800,000 people will reach the national state pension age in 2012.

The government estimates that pension spending will increase by £4bn by 2012