Life expectancy for new 25-year-old members of the five Danish workplace pension funds run by PKA has risen to 90 from 85 in just five years, the company has said.
Because of rising longevity, the pension funds will vote on an adjusted pension deal at next year’s annual general meetings (AGMs), shifting funds available to payments and away from risk coverage, according to PKA, which manages DKK200bn (€26.8bn) on behalf of the social and healthcare sector pension funds.
Britt Brandum, head of membership, said: “Of course, we have had to set up our system so we can respond to this development, and the work has been going on for some years now.”
At the AGMs of the five pension funds, which will take place next spring, delegates will vote on an adjusted pension package.
This will include an increased share of pension contributions going towards pension payments, with slightly less used for risk coverage.
PKA said its new longevity analysis showed members’ current life expectancy had improved in the five years to the end of 2012 alongside a significantly stronger general expectation of future improvements in longevity.
Brandum said longer and longer lives were a challenge for the pensions industry, and perhaps particularly for a pension fund such as PKA, where 90% of the 260,000-strong membership are women, who live longer than men.
She stressed, however, that the increased longevity was factored into future pensions.
“Members will, of course, get the pension they are entitled to,” she said.
“But part of the profit made on investments will go towards financing an extension to pensions instead of an increase.”
Brandum noted that parties involved in last spring’s wage negotiations had opted to prioritise an increase in pension contributions despite the very limited money available.
On top of this, in the last few years, PKA has focused on making members aware of how they could supplement their pension themselves, she said.
“That said, it will be appropriate for future pensioners to stay in the labour market for a few more years than they perhaps had in mind, in order to get more in retirement,” she added.
As of January this year, PKA members had already been given the opportunity for flexible retirement, the company said.
There are now two new flexible retirement options for PKA members — a partial pension and a payment pause.
The partial pension can be taken in addition to part-time work, with members working slightly longer and having their pay supplemented by a part-time salary pension.
Retired members could also take a payment pause when returning to work for a period.
Both options involve the member continuing to pay into his PKA pension and therefore improving eventual pension payments.