Pension entitlements due to periods of unemployment are normally at least partially protected, for example through credited years of contribution. In addition, residence‑based and contributory minimum pensions help cushion the impact of unemployment breaks. This indicator shows how these career breaks affect future pension entitlements. Workers at average‑ and low-earnings level with five years out of the labour market due to unemployment will have total pensions 7% and 5% lower, respectively, than those of a full-career workers on average across the 38 OECD countries. Total benefits at average earnings are more than 10% lower than those of full-career workers in Chile, Hungary, Korea, Latvia, Luxembourg, Portugal, the Slovak Republic and Türkiye as there is limited credit provided to cushion the impact of the break.
Pensions at a Glance 2025
Most OECD countries provide some degree of unemployment credit for at least an initial period. On average five years of unemployment will result in total pensions being 7% lower than for full-career workers for the average‑wage case (Figure 5.1). When starting the career 5 years later and then having a period of 10 years of unemployment, this increases to 22% lower (Figure 5.2). For low earners, the impact of career breaks on total pensions is slightly lower – 5% and 18% lower compared with the full-career baseline for the five‑ and ten‑year break case, respectively. Compared with a full-career worker in a country with a normal retirement age of 66 for example, these 5‑ and 15‑year missing years represent about 11½%and 34% of the career length, respectively. This helps assess how pension systems cushion the impact of unemployment on total benefits: without any protection, these shares provide an order of magnitude of the expected negative impacts of these breaks on pensions.
With these career breaks, the resulting retirement age increases in a few countries. In France, Greece, Luxembourg and Slovenia, additional years of contributions are needed to meet the eligibility thresholds for retirement without penalty. The same is also true for Spain, but only for the longer ten‑year case. In Portugal the normal retirement age (for the full-career case) is two years before the statutory retirement age as the retirement age without penalty can be reduced by four months for each year of contribution exceeding 40 years made after age 60. The missing contributions during unemployment years mean that in the career-break cases, workers have to retire later to avoid penalties.
For the average‑wage worker, pension shortfalls relative to someone with a full career varies widely across countries. They are larger for longer duration of career absence and for high earners. In Latvia, Luxembourg and Portugal the total pension loss after a five‑year unemployment break is 11% or more. Only the first year is partially covered in Latvia. In Luxembourg and Portugal, the retirement age increases as a result of the unemployment break by three years and one year, respectively.
In other countries, pension rules can fully offset the fallout from spells of unemployment. This applies for example in Ireland, and for the five‑year case in the United States. In the United States, this is because total accrual rates and the reference wage used to compute benefits are not affected – for example, pension entitlements stop accruing in the United States after 35 years. In Ireland, this is because such a break does not affect the contribution-based basic pension level. In New Zealand, as well, periods of unemployment do not affect the basic pension as it is entirely residence based. In Colombia the relatively high level of the minimum pension means that all the career-break cases are fully protected, and total pensions also remain unchanged. In Mexico the new welfare component, which provides a top-up to the FDC, ensures that workers have the same pension entitlements even for the longer unemployment period as long as the minimum contribution period of 1 000 weeks is met.
In Canada, Denmark and Iceland, although there is no protection in the earnings-related pension schemes, these countries have basic or supplementary pensions that are gradually withdrawn against other income. Although this provides limited protection for the five‑year case it does cushion the impact of the longer unemployment break scenario, particularly for low earners.
There are countries which afford low-paid workers better protection against long-term unemployment than average earners, because contributory minimum pensions and resource‑tested schemes play a crucial role – Belgium, Canada, Chile, Colombia, Iceland, Mexico, the Netherlands, Norway and Poland. By contrast, lower earners in Germany are more affected by the longer unemployment break case than average earners, as low earners then lose their entitlement to the individual basic pension supplement due to their shorter contribution period.
Definition and measurement
For the unemployment career case, men are assumed to embark on their careers as full-time employees at 22 or 27 for the late entry case, and to stop working during a break of up to ten years from age 35 due to unemployment; they are then assumed to resume full-time work until normal retirement age, which may increase because of the career break. Any increase in retirement age is shown in brackets after the country name on the charts. For these countries, the corresponding pension wealth is calculated for the unemployment break cases and discounted back to the normal retirement age for the full-career worker. The simulations are based on parameters and rules set out in the online “Country Profiles” available at http://oe.cd/pag.
Note: Figure in brackets refers to increase in retirement age due to the career break. Individuals enter the labour market at age 22 in 2024. The unemployment break starts in 2037. Low earners in Colombia, New Zealand and Slovenia are at 64%, 61% and 55% of average earnings, respectively, to account for the minimum wage level. For those countries with delayed retirement ages the corresponding pension wealth is discounted back to enable comparison with the full career no break case.
Source: OECD pension models.
Note: Figure in brackets refers to increase in retirement age due to the career break. Individuals enter the labour market at age 27 in 2029. The unemployment break starts in 2037. Low earners in Colombia, New Zealand and Slovenia are at 64%, 61% and 55% of average earnings, respectively, to account for the minimum wage level.
Source: OECD pension models.