State Pension vs. Private Pension: The Basics for New Tech Employees in Europe

/ Salary & Compensation Insights, Technology Hub

You’re a tech professional starting a new job in the EU. Your contract is sorted, your visa is approved, and you’re ready to go. Then you look at your first payslip and see a huge deduction for “Social Security.”

Where is that money going? A large chunk is for your state pension.

If you plan to build a career in Europe, you must understand the pension system. It’s almost always built on “pillars.”

Pillar 1: The State Pension (Your “Pay-as-you-go” Floor)

This is the mandatory, public pension.

  • How it works: The “social security” you pay from your salary today is not being saved in a “box with your name on it.” It is immediately paid out to current retirees.
  • The Idea: It’s a “solidarity” system. You pay for today’s pensioners, and in 40 years, the next generation of workers will pay for you.
  • The Problem: Europe has an aging population. Fewer workers are paying in, and more retirees are taking out. The state pension is a foundation, but it is not enough to live on comfortably.

Pillar 2: The Occupational Pension (The “Company” Pension)

This is a pension fund connected to your job.

  • How it works: Your employer, and often you, pay a percentage of your salary into a private pension fund.
  • The Benefit: This money is in a box with your name on it. It’s invested and grows over time.
  • Common in: Countries like the Netherlands, Switzerland, and for jobs in Germany (as the betriebliche Altersvorsorge or “bAV”). A recruitment agency in Europe will often list this as a key “benefit” for a job.

Pillar 3: The Private Pension (The “You” Pension)

This is any pension you set up and pay for yourself.

  • How it works: You decide to save extra money. You open a private pension account and contribute to it.
  • The Benefit: You have 100% control. Often, governments encourage this by giving you a tax break on the money you contribute.

The Rise of PEPP: A New Option for You

The EU knows that expats and mobile workers have a problem: if you work 5 years in Poland, 5 in Germany, and 5 in Spain, your state pensions are a mess, and your private pensions are locked in different countries.

Enter the Pan-European Personal Pension Product (PEPP).

  • What it is: A new, voluntary Pillar 3 pension launched by the EU.
  • Why it’s great for you:
    1. It’s Portable: You can keep paying into the same PEPP account even if you move from Berlin to Paris to Rome.
    2. It’s Low-Cost: Fees are capped at 1% of your saved capital per year.
    3. It’s Simple: It’s a standardized, regulated product designed for a modern, mobile workforce.

What This Means for You

When you’re comparing jobs in the EU, don’t just look at the gross salary. Ask your staffing agency, get-talent.eu in the EU about the whole package.

  • “What are the mandatory state pension contributions?”
  • “Does the company offer an occupational pension (Pillar 2)?”
  • “Can I contribute to my PEPP or private pension from my payroll?”

The state pension (Pillar 1) is just your survival money. Your real comfort in retirement will come from Pillars 2 and 3. Start saving from day one.

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