Denmark’s pensions and insurance industry association has called on the government to facilitate more flexible working patterns around retirement age, highlighting several aspects of the country’s much-lauded pension system which it said are ripe for change.
Per Bremer Rasmussen, chief executive officer of Insurance & Pension Denmark (IPD, Forsiking & Pension), said in a commentary that though the Danish pension system was considered world-class today, “there are actually several elements that we in the industry want to put under the microscope – without weakening the foundation.”
The government-planned pension commission should look at increasing flexible retirement both before and after state pension age, work to simplify the public pension system and rules applying to private pensions, and ensure the best possible interaction between the various pillars of the pension system, so that it always pays to save up for retirement, he said.
Evidence suggested that increased flexibility was required in the country’s pension system, said Bremer Rasmussen, citing a study conducted by IPD which found that 25% of Danes wanted to retire before retirement age – along with another study that found a third wished to retire later.
He proposed a smoother transition away from working life, with the option for employees to reduce their hours incrementally while approaching retirement age, arguing that this increased flexibility could allow many Danes to work for longer after the official retirement age.
The decision in Denmark to increase state pension age in line with demographic changes – reached as part of the 2006 Welfare Agreement – was an important precondition for maintaining the affordability of the current welfare system, said Bremer Rasmussen.
“From our point of view, the development requires more flexibility in the pension system than we have today,” the CEO said.
But there were currently several barriers to flexibility both before and after the state pension age, he said. such as the inability to delay the start date for “ratepensioner” (installment pensions).
“The retirement decision is for most an either-or decision – for many, a smoother transition to retirement will be preferable,” he said.
The Ministry of Employment is currently preparing the agenda for the proposed pension commission. Its establishment was agreed in May 2019, as part of a pact between the then Liberal Party-led coalition government, the Danish People’s Party and Radical Liberal Party, on pension reforms to increase the coverage of the senior pension – an early-retirement disability pension.
The presidency of the Danish Economic Councils (De Økonomiske Råd) said last year the commission should also consider other pensions issues, such as the relationship between the public private sectors, and pension coverage for groups with a loose connection to the labour market.