DENMARK - The government wants the elderly to stay longer in their jobs before retiring but pensions experts say proposed tax reforms could have the opposite effect and force individuals to retire early.

"Many people will most likely get the idea that if they have a longer pension-in-payment period, they will fall below the annual [tax] threshold for the individual, and it suddenly becomes attractive to retire earlier, " claimed Per Bremer Rasmussen, chief executive of Forsikring & Pension, the pension fund association.

Part of the recently-announced finance reforms - which were designed to stimulate the economy included the introduction of an 8% special tax on individual pension plans above worth DKK284.000 (€38,121) a year.

According to estimates from Forsikring & Pension, this means a 64-year-old, who is considering retiring at 65 years, will earn less from the contributions he pays in his last year should he proceed under current proposed tax reforms.

"In that situation, we are legally obliged to advise people to retire earlier if that is what is beneficial to their private finances," said Bremer Rasmussen.

Torsten Schack Pedersen, a liberal politician, said he understood the pensions industry wants as good terms as possible for their customers but argued he sees nothing unreasonable in the reform - quite the contrary.

"It is not intended that people with large retirement assets who are paid with large deductions, get extra benefit from us lowering the income tax. So we have made a compensatory tax to make sure they pay the tax they would otherwise have paid, "he said.

Former economic wiseman Torben M. Andersen said he has not seen the example figures presented by Forsikring & Pension, though he doubts the tax reform will change the Danish pension plans habits.

If nothing else, he said, people do not know what the rules mean in an already complex pension jungle, and this should perhaps be the larger focus.

"It is very unfortunate that it has not been made more clear what impact the tax has on the pension plans. It is a mess because there are a lot of schemes that are difficult to understand, and it is very unfortunate in a situation where people should stay in work longer and perhaps make the wrong decision as a result, "he said.

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