In a new book, Danish pensions industry veteran Helen Kobæk has outlined a vision of an entirely revamped state pension which would give individuals an income not only in old age, but also to facilitate a series of career breaks during their working lives.
Kobæk, who was chief executive officer of the labour-market pension fund PenSam for nearly 31 years until five years ago, has also proposed in the book entitled “Job, Stop, Go!” that politicians start funding the state pension system, and that the other pension and savings pillars are adapted to enable regular sabbaticals too.
Kobæk proposed this radical overhaul of the pension system as the solution to a number of problems she perceives with the current set-up.
Today’s system for saving money for a pension and to cover other periods without income – through tax, labour-market pensions and private savings – is opaque, rigid, badly suited to the young in particular, and will be hard to afford as more people become older, she asserted.
“Every second girl born in 2000 can expect to live to 100,” Kobæk wrote in the foreword to the book, published by Copenhagen’s Life Publishing, adding: “We have to arrange things so it is good to live your life for the whole of life.”
She said society also needs to invest billions in sustainable solutions.
“And we can actually manage all of this in one go, but it calls for some new thinking,” wrote Kobæk.
“I am proposing a reform here, in which we radically reorganise the pension saving system and transform it into a career-break saving system, so people can afford to take breaks throughout life, and so older and elderly people also have more freedom and financial benefit from working, if they can and want to do that.”
She said that in reforming the system, there should be no more patch-up solutions, but instead new thinking as to how things can be made better for everyone, adding that this is why she wrote the “debate book”.
In the new model sketched by Kobæk, starting from 2025, people aged 11 to 20 would have access to four sabbaticals before the age of 70.
Those between 21 and 40 would have access to three, with two potential breaks for 41 to 50-year-olds and just one for those aged 51 to 70.
She proposed the state system makes DKK200,000 (€26,900) available to individuals for each career break.
The idea rests of the whole system changing from the current pay-as-you-go method, with early-retirement pension and state pensions financed through the national budget, to one that is funded in advance.
Every newborn child would be given DKK1m from state finances into a “work-break account” (pausekonto), according to the proposal, with the money in these accounts invested according to the UN global goals, as many labour-market pension savings are currently.
Since around 61,000 children are born each year in Denmark, Kobæk wrote, the payout from government would amount to around DKK61bn annually, equating to some 5% of annual tax revenue.
The 134-page book contains many other recommendations and ideas for change, including improving transparency in the pension system, and it includes contributions from other experts.
In the 2015 IPE Awards, Kobæk won the gold pension fund achievement of the year award, in recognition of the innovative work she led at PenSam to add products and solutions enabling members to take early retirement as a result of invalidity – combined with preventative healthcare programmes to reduce the number of such career exits.
PenSam’s models were subsequently adopted by many other pension funds.
Kobæk is currently an independent consultant and chair of Danish real estate data firm Estaid.