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Danish government considers launch of pensions commission

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The Danish government has said the country’s pension system needs to be analysed and that it is open to setting up a pensions commission to look into issues such as tax and insufficient coverage.

The minister for taxation Morten Østergaard, said: “It is paradoxical that we have a system in which people first pay a high level of tax and afterwards get a series of benefits and rebates which depend on how old you are.

“It is complex and needs to be thoroughly analysed to make all these questions fall into place,” he told the business daily Børsen.

A spokesman for the ministry confirmed the comments and said the minister had said he was open to the idea of setting up a pensions commission.

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Østergaard was responding to calls from experts including chief economic adviser Hans Jørgen Whitta-Jacobsen, Nina Smith — academic and member of the welfare commission — and pensions industry representatives, the ministry said.

They had recently called for a spring cleaning of the pension system, it said.

“It makes an impression when a chief economic adviser and one of the most respected economists say what they they have said,” Østergaard said.

“And of course we in the government will consider what is the best way to conduct such an analysis,” he said.

But the analysis would have to be thorough in order to avoid rushing into changes without having a clear overview of the consequences, he said.

PFA, Denmark’s largest commercial pensions provider, said it welcomed the fact the minister was open to having a pension commission to “clear up the pensions jungle.”

Lars Ellehave-Andersen, group director, said the company had been concerned for some time about Danish pensions model, which was often described as the world’s best - most recently in the Melbourne Mercer Global Pensions Index.

“This is also the background to us asking the government at the beginning of March to set up a working group to chart the extend to which overall tax burden and offset rules were eroding Danes’ motivation to save for a pension,” he said. 

In the Børsen article, Smith said it was becoming increasingly clear that although there was a great pension system in Denmark, there were some “colossal problems with incentives”. 

She also says system should be made more transparent.

Smith said it was lucky people did not understand the pension system, because if they did, there would be a serious problem since there many extremely high marginal taxes.

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