European Commission discusses pension gaps for people with non-linear employment histories.

On 5 and 6 October, the European Commission held a workshop on pension provision for people with interrupted or non-linear career histories. The focus was on how to close existing gaps in pension provision and ensure adequate income in old age. Many pension systems are still designed around continuous full-time employment. By contrast, people working part-time or on fixed-term contracts, or experiencing longer breaks in employment, often build up lower pension entitlements.

Women, young people, people with low levels of qualification and people with a migrant background are particularly affected. Low earnings, gaps in contributions and limited access to occupational pensions schemes leave them inadequately protected in old age, even if they are covered by the statutory pension system.

Interrupted careers often result in lower pensions

In light of demographic change, many European countries have strengthened the link between contributions and pension benefits. This means that the level of pension benefits people receive increasingly depends on how much they have paid into the pension system over the course of their working lives. Among other things, this is intended to encourage higher labour market participation among older people and women.

However, this can put people with interrupted employment histories at a disadvantage. The more heavily pension benefits depend on contributions paid, the greater the impact that low earnings, fixed-term employment, unemployment and other career interruptions can have on pension levels.

Pension coverage alone is not enough

In her background paper for the workshop, Kati Kuitto of the Finnish Centre for Pensions explained that most forms of non-standard employment are, in principle, covered by statutory pension systems. Nevertheless, gaps in coverage remain, particularly for people with very low earnings or short working hours.

In some Member States, certain groups of workers can only obtain pension coverage on a voluntary basis. Examples include marginally employed workers in Austria and certain contract workers in Czechia. In Germany, people in marginal employment (Minijobs) can opt out of compulsory pension insurance.

However, being covered by a statutory pension scheme does not automatically guarantee adequate pension entitlements. Minimum qualifying periods and contribution thresholds can create additional barriers, particularly for people in fixed-term, seasonal or irregular employment. Long insurance or residence requirements can also disadvantage people with a migration background. 

Crediting periods of unemployment or unpaid care work towards pension entitlements, alongside other compensatory mechanisms, can partly mitigate these disadvantages. However, such measures cannot fully offset the existing inequalities.

Additional barriers to occupational pensions

Alongside statutory pensions, occupational and private pension provision are becoming increasingly important. Yet people on low incomes or with interrupted employment histories may be particularly disadvantaged in these areas. Early contributions are particularly important in funded pension schemes, as they allow accumulated capital to generate returns over a longer period.

Moreover, occupational pension schemes are often designed around stable, long-term employment relationships. Minimum periods of employment, waiting periods, earnings thresholds and minimum working hours can make access more difficult, particularly for part-time workers, people on fixed-term contracts and those who change employers frequently.

Automatic enrolment schemes cannot eliminate these barriers entirely either. Under such arrangements, employees are enrolled in an occupational pension scheme without having to apply. However, existing eligibility requirements, such as minimum periods of employment or earnings thresholds, can still exclude certain groups of workers. Limited provision for crediting periods of care can further exacerbate these inequalities.

Extend mandatory pension provision to more forms of employment

The workshop discussions highlighted that voluntary pension arrangements often fail to provide adequate coverage for people in non-standard employment. Participants therefore advocated extending mandatory pension provision to additional forms of employment and removing existing barriers to access.

The growing importance of occupational pensions in maintaining living standards in old age was also critically discussed. Some participants argued in favour of automatic enrolment schemes. However, the national models presented showed that minimum earnings thresholds and minimum periods of employment often still apply.

There was agreement that redistributive measures, such as crediting periods of care towards pension entitlements, are important but insufficient on their own to ensure adequate pension provision.

In the second quarter of 2027, the Social Protection Committee and the European Commission are due to present their joint report on adequate social protection in old age. The report is also expected to address pension provision for people in non-standard employment.