The government of Denmark – a country ranked, according to the Melbourne Mercer Global Pensions index, as having the best pension system in the world – is planning to push funded pensions coverage into new territory.

The Liberal Party (Venstre) government, publishing its ‘2025 Plan for a Stronger Denmark’ in August, set out a raft of proposals for change, affecting such diverse areas as employment, immigration, education and welfare.

Respecting pensions, the main steps it plans to take – if it succeeds in convincing political allies – are an increase in the retirement age from 67 years to 67.5 by 2025, the introduction of two new types of pension, and tax incentives to save for a pension.

The first type of pension saving scheme proposed is aimed at those with five or fewer years to retirement and aims to solve the problem that later pension contributions are offset against welfare benefits to the extent that it is not worth making them.

The second is a system of mandatory pension saving for nearly all people of working age who are not already saving at least 6% of income into a labour-market scheme or other private arrangement.

The reform also includes an increase in tax-free personal allowances to make work pay for those on low and middle incomes, while those earning more than DKK300,000 (€40,000) a year will only be given this allowance in full if they pay into a pension.

In this case, it will take the form of a pension bonus – aimed at supporting incentives to save, the government says in its 2025 plan.

While many voices in the pensions sector have welcomed the plan to make it pay to save for a pension in later working life, by means of the proposed ‘age-related annuity savings’ product (aldersopsparingslivrente), the response to the mandatory pension has been lukewarm.

Lizette Risgaard, chairman of the Danish Confederation of Trade Unions, said the idea worried her. “It is a break with the Danish collective-bargaining model in the labour market,” she said.

Pensions industry association Forsikring & Pension (F&P) said it was unhappy with the principle of compulsory pension savings.

“The conditions for pension savings should be made so good it makes good business sense for everyone to save,” said Per Bremer Rasmussen, F&P’s chief executive.

The question of which of Denmark’s competitive pension providers would  manage the money collected in the new mandatory savings scheme appears to have already been answered, since the 2025 plan says the contributions – set to start flowing in 2018 – will be paid to ATP “as a starting point”.

ATP is likely to be proud to be named as the default provider, as the decision recognises its successful investment results, as well as the slim cost level it has achieved.

It has been suggested the total investment sum gathered from the new mandatory savings, estimated at DKK3bn, would be financially insignificant for ATP, with its DKK700bn in pension assets under management.

Nevertheless, there are signs other players in the sector would have appreciated the chance to bid for the business.

Within the 2025 proposed reform, the suggested changes to income tax have perhaps received the most public attention so far, particularly a reduction in the top marginal rate to 10% from 15%.

Nothing is fixed yet, however, the reform is still only a proposal from a minority government and is entering the public sphere for debate.