The average total fertility rate in Europe is below 2.0, which means that with each passing year the workers-to-retirees ratio will keep decreasing. From my understanding this makes it likely that many state pension funds will eventually collapse, or at least fail to fulfill their original obligations.

With this in mind, is it a reasonable strategy to contribute anything above the minimum required state pension amounts? E.g. the UK allows to add up to £40,000 every year to one's state pension and I presume most other countries have a similar program.

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    The UK doesn't allow you to add to your state pension at all, except in a few special circumstances that don't apply here. The £40,000 per year is money that you can contribute to a private pension and receive tax relief for it.
    – Mike Scott
    Commented Jul 9, 2016 at 5:31
  • Your understanding is incorrect in several ways. A state pension fund (if that is what it is) can invest abroad just like any other. Pension schemes based on using current contributions to pay current pensions (instead of investing them) do depend on the economic performance of the country itself but lower fertility does not in any imply that it would necessarily collapse.
    – Relaxed
    Commented Jul 9, 2016 at 7:31
  • Case in point, over the last few decades, the ratio of retirees to workers has increased a lot in many places without creating any insurmountable problem. That's because productivity gains make it possible to set more money aside for pensions while still enjoying huge income gains for the working age population (and if robots replace workers in the near future, all the better, that's even more productivity!). Recent reductions in benefits result from policy choices (unwillingness to raise contributions for various reasons), not from the demography.
    – Relaxed
    Commented Jul 9, 2016 at 7:36
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    Also, there is no “European” pension system, to the extent that it is relevant at all, you should look at national fertility rates and there are European countries (France, Ireland) with a rate of 2.0, above that of each and every developed country on earth. This has another consequence: Benefits from pension funds ultimately have to be paid by current workers as well (only through another mechanism). If decreasing population across industrialized countries means the economy will be depressed for a long time, then you are in trouble no matter what.
    – Relaxed
    Commented Jul 9, 2016 at 7:39

4 Answers 4


Looking at the web site you linked, it appears that it is talking about various forms of individual saving, investment or pension plans. In other words, not really paying more to your state pension per se, but rather some kind of separate pension plan to supplement the public, government-funded pension.

That makes sense, too, given that many public pension schemes these days are centered around flows not funds. For public pension schemes, it's common for your tax money to go in and immediately back out, and in return, you get a promise that someone else's money will result in you receiving a certain pension payment later. (Sweden's current public pension scheme certainly works this way.) This stands in contrast to individual pension plans where the money you pay into the plan is earmarked for you specifically, and the less you pay or the worse your investment choices perform, the less you receive in payments in the end.

Especially under such an assumption, the question becomes: are you confident that future pensions will reflect today's promises, and are you happy with today's promises?

If the answer to either is any form of "no", then having some additional money somehow invested on the side makes sense. The amount would then depend on to what extent you distrust future pension payments. At one extreme we find full trust in the government's promises and no savings of your own; at the other extreme, you end up aiming for sufficient funds by retirement that you could live on those funds alone if necessary, treating the government pension plan as a bonus if it pays out as currently promised. Only you can know where on this continuum you stand, but I do recommend some soul-searching on the matter because the answer will hugely impact how much money you want to invest on the side.

Whether the amount is added to your government pension account or sits elsewhere (possibly locked away until you reach retirement age), if you plan to make additional payments to add to your later pension, you should make very, very certain that the money is booked to you specifically and cannot easily be transferred to other retirees by political decree. The easiest way to do that, if you have the self-discipline to not touch the money, is probably to open an individual investment account of some kind and contribute money to that.


For the rebellious American in me, I'd avoid anything with the title of "State Pension" independent of birth rates. I am unfamiliar with the details of the plan, but I imagine that the disbursement and investment of those funds are handled by a bureaucrat. Your question suggests that there are things outside the performance of investments that determine one's results.

To me, it would be unthinkable to voluntarily put extra money in the US Social Security fund. Our legislature spends money like "drunken sailors" and fund all kinds of silly programs at their constituent's expense. I would not trust those people to sit my dog, let alone with my financial future.

With money I feel it is best to keep as close of control of it as best you can. My answer would be "No" regardless of birthrates.

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    Unless you keep your money as cash under your mattress, its disbursement and investment will always be handled by a bureaucrat. Bankers and stockbrokers are bureaucrats too.
    – Mike Scott
    Commented Jul 9, 2016 at 5:34

Even without the data you provided, typically, you can do better than any collective fund by investing yourself. This requires, of courses, some effort and some knowledge (the more the better), and - most critical - discipline.

If you are willing to to learn a little bit and to put a little effort in, and you have the discipline to not just spend it one day, you are better off with an independant strategy.


I am a newbie but I ran a small hedge fund and traded the desk for all the usual securities for Stifel. In the face of quantitative easing in a non reserve currency this would be a really bad idea. Britain did not jettison the EU over immigrants. The best case for the EU is a Japan like multi decade malaise. The likely fate of pension funds in Europe is so grim in Europe as to make your risk to reward absolutely non sensical. Even a rebucketing of global currencys into a universal measurement vehicle like the SDR leaves Europe as the leper and its apportionment so damaged that goverments will need liquidity so badly pension funds could be devalued by being forced to buy EURO's In the worst case Germany bows out and you could get a lehman like effect. But worse as the currency must ultimately be valued against the dollar for tangibles and energy. opinion: if you took that money and bought lottery tickets you might fare better. Those who don't work on wall street can't fathom the depths our current derivative and currency market. Buy T_bills and move the T-Bills to GLD after the crash. There will be one its a function of the market. Fear will swell you T bills value. Counter intuitively GLD will plummet as it is correlated to the temporarily inflated $ the inflow into T bills creates and then move you position over in six even trades over 6 months. Reactive idiots will now buy GLD as the herd buys opposite of the value proposition. Doubt? Pull the charts from 09/09 thru 4/10. Best of luck

  • Doesn't seem to address the question
    – keshlam
    Commented Jul 9, 2016 at 8:33

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