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Denmark’s oft-lauded pension system is set to expand its funded coverage further still under a new plan set out by government to make it compulsory for nearly everyone of working age to contribute to a scheme.

The proposal, published as part of the government’s long-awaited 2025 Plan covering a range of policy areas, suggests introducing compulsory pension savings of 2% of work income for all people in Denmark aged over 25, who are saving less than 6% of their income into a pension.

The scheme is to cover benefit recipients, employees as well as self-employed people, and the mandatory contributions to it will in principle be paid to ATP, according to the wording of the plan.

Launching the proposal, the finance ministry said: “Today there are around 750,000 adult Danes who have no savings for their old age, or not enough.”

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It said the three pillars of Denmark’s pension system — the unfunded state pension (Folkepension), statutory funded scheme ATP and the labour-market pension schemes and private pensions — were a good foundation for the future, but that there were areas where the “good and secure” pension system needed to be strengthened.

Under the proposal, the mandatory pension contributions will start at a level of just 0.25% in two years’ time, rising gradually to 2.0% by 2025.

The 2025 Plan covers a wide range of political issues, from long-term unemployment to student finance and migration control.

The pension proposals will now be discussed among the political parties in Denmark as well as the other stakeholders in the labour-market and wider economy.

Per Bremer Rasmussen, chief executive of Forsikring & Pension (F&P) the Danish pensions and insurance industry association, said: “It should be no secret that we are not happy about compulsory savings.”

“Basically, I think that the conditions for pension savings should be made so good that it makes good business sense for everyone to save,” he said.

Bremer Rasmussen added that social partners had taken responsibility for retirement provision by making it a key element within existing collective bargaining agreements, he said.

“I recognise, however, that the politicians have the desire to get everyone on board the pensions bus,” he said.

Bremer Rasmussen said he expected it would be possible for many companies to offer the new product.

The governing Liberal Party (Venstre) will need broad support from other parliamentarians and civil society to pass the proposals, as it currently rules with a one-seat majority with the backing of three other political parties.

The government’s plan also addresses a problem that the country’s pension industry has long wanted addressed, namely that many Danes have no incentive to save for a pension later in their working lives because of the way social benefits are calculated.

The government said a special pension scheme would be introduced, which can be used by people with five years or fewer until state pension age.

Up to DKK50,000 (€6,700) can be paid into the scheme, with contributions being non-tax deductible, but the pension payout being tax free.

Pensions paid out through this annuity product will not be offset against social benefits.

As well as this, the government plans to give an extra tax allowance for people on incomes between DKK300,000–535,000 paying into a deductible pension scheme.

The tax allowance will apply for pension contributions of more than 8%.

Bremer Rasmussen said it was very important that it was made attractive for everyone to save for retirement.

“So I am happy that the government has recognised the problem and it doing something about it,” he said.

Labour-market pensions provider PKA also welcomed the fact the government was tackling the problem. “The initiative is a step in the right direction by finding solutions to the challenges the pensions sector is in,” it said.

PKA said it would follow the political negotiations that would now begin with interest.

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