How Much Do You Need to Retire: Introducing the Living Pension

On a recent visit to Japan — the country with the world's oldest population —, Paulien Osse, co-founder of WageIndicator, sat down with elderly people to talk about growing old without enough to live on. One line from those conversations has stayed with her ever since: "I am sorry that I still live." It was an apology, offered by someone, simply for the fact that they had outlived the money meant to support them – that they’re now a cost or burden on their society – and captures the urgency of creating a Living Pension framework more than any statistic could.

A year later, as WageIndicator readies to launch its Living Pension framework for 185 countries, it is clear that across the countries studied, most people either have no pension at all, or are unaware how much money they need to live a dignified life after their working life ends. Below, we address key questions about the Living Pension framework, how it is calculated, and what it means for workers , employers, governments and policymakers.

What is a Living Pension?

A Living Pension is defined as the minimum income required by an individual to maintain a basic but dignified standard of living after retirement. It is based on a country- and region-specific cost-of-living basket and is calculated for an individual, independent of whether they live alone or with family.

Why is it needed now?

The world over, nations are ageing at an unprecedented pace due to rising life expectancy combined with declining fertility. This has two implications. One, there is an increase in the number of years spent in retirement and two, there is a shrinking base of workers which can fund the (state) pension needs of the retired population.

Moreover, the labour market too is changing structurally – the expansion of self-employment, informal work, gig work etc has weakened traditional pension mechanisms and many workers do not have adequate income over their lifespan to lead a dignified life.

That’s why WageIndicator felt it was necessary to develop a tool to assess income adequacy in old age.

How is the Living Pension calculated?

The Living Pension concept extends WageIndicator’s Living Wage/Living Income framework. It calculates the income needed for a minimally acceptable standard of living, but for years beyond the working life.

In other words, it calculates the monetary cost of a basket of goods and services required to meet essential needs – these include food, housing, clothing, transport, water &utilities, healthcare, and phone & internet, adapted to national and regional conditions.

The Living Pension framework is also expected to account for higher healthcare needs in old age, although the first edition that is expected to be released on 30 November 2026 does not fully incorporate these costs due to data limitations.

What are the other key features?

Unlike the Living Wage or Living Income which are calculated for families, the Living Pension is constructed for an individual, not a household. This has been done because many older people live alone, are widowed, or depend on unequal resource-sharing arrangements. It is also important from a gender lens since women are more likely to spend old age alone and to have lower pension entitlements due to interrupted careers and lower lifetime earnings.

Social security contributions are excluded since the individual is already retired, but income tax may still apply depending on national regulations.

The Living Pension is a globally comparable framework and number.

I am a worker, whose retirement age is still far away. How does this affect me?

The Living Pension is a benchmark for assessing what is the minimum income actually needed for a dignified retirement. The total required pension wealth for an individual is the product of the monthly living pension and the number of months in retirement.

The Living Pension framework also answers the question of what portion of working-life wages the average worker must set aside to fund their retirement. This is captured by the concept of the funding rate.

The Living Pension framework doesn’t prescribe the source of funding. The same required rate can be met through public contributory schemes, through employer provision, through individual saving, or through some combination of the three. The choice among these paths is in the domain of policy and institutional design rather than of arithmetic.

What's the "funding rate," and how is it calculated?

The funding rate is the share of a Living Wage that a person must set aside across their working life (via pension contributions, employer provision, or personal saving) to fund retirement. In practical terms, it is a product of two factors:

1. The first is an adequacy component, or the ratio of the Living Pension to the Living Wage, which measures how costly a dignified retirement is relative to working life.
2. The second is a demographic component, or the ratio of the retirement years to finding period (working years), which measures how many retirement years each working year must support.

In effect, the funding rate is calculated thus:

Funding Rate = Adequacy Ratio × Demographic Ratio

What’s the global average for the funding rate?

WageIndicator’s study for the first edition of the Living Pension framework showed that across 182 countries, 25% of the Living Wage must be set aside during the working life to fund a dignified retirement. Of course, this is an average and it differs widely across countries as the table below shows: