Change Danish pensions law to allow phased retirement, says Aon

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The Danish government should change pensions law to allow older workers to take a partial pension while still working in order to keep people in the labour market, according to consultancy Aon.

The government wants to increase Denmark’s state pension age just two years after the last change, but this is unlikely to keep people in the labour market, Aon said.

Jannik Andersen, head of human capital at Aon Denmark, told IPE: “We have to have some legislation to enable people to continue paying into their private, or labour-market, pension while at the same time receiving a partial income from it.”

The Danish parliament passed a law two years ago raising the state pension age and allowing for an additional increase of up to one year to take place every five years provided there had been an increase in life expectancy.

However, in January the government proposed an earlier increase to the state pension age in response to data showing a more rapid rise in longevity than expected.

Andersen argued that, while the government said it has two goals in raising state pension age – to avoid large increases in overall state pension spending and to keep people in the labour market for longer – the change is not effective in achieving the latter.

This is because Danes have huge private savings that they can use to enable them to retire early, he said.

Under current legislation, people born before 1954 can receive their state pension (folkepension) at age 65, rising to 68 for those born in 1967 or later.

The government’s new proposal is for those born in 1957 or later to receive their state pension six months later than under the current law.

The proposal is likely to be presented next month and voted on by parliament before the summer break.

Aon said politicians would be better off offering incentives to stay in employment at least until retirement age, with extra years worked rewarded with possibility of having an income including both pension and salary.

Andersen said: “The government want people to stay in the labour market for longer, but if you have a very physical job, you cannot work until you are 65 or 70, but you can probably semi-retire and have a part time job – though the question is whether the companies will keep their staff if they are only able to work half-time.”

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