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IPE special report May 2018

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Denmark should scrap early retirement – report

DENMARK – The Organisation for Economic Cooperation and Development says Denmark should consider scrapping its early retirement scheme to help it meet the challenge of population ageing.

“The foremost challenge is to prepare for the rapid ageing of the population between now and 2040, when more than one in four adults will be over 65 years old,” the OECD said in a report.

It called for Denmark’s voluntary early retirement scheme to be abolished “altogether”. Failing that, it says, it called for the scheme to be made a “strictly defined contribution system” as a second-best solution.

It suggested applying “activation measures” to all workers up to the age retirement that would signal that people are expected to work. It also called for the statutory retirement age to be put back to 67 from 65.

In a submission to the European Commission last year, Denmark said its pension system was “well-balanced and able to secure present and future pensions adequate coverage”.

And in April this year ratings agency Standard & Poor’s said Denmark had “ample” fiscal flexibility to meet the demands of an ageing population.

The OECD said that, in theory, inward migration could help stem he ageing burden – though it said Denmark’s experience with migrants “has been very mixed”.

The Danish pension system is a pay-as-you-go system in the first pillar with wage indexation.

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