Politics and Analysis
No Change in Danish Retirement Age
13. July 2023
Denmark may have the potential to keep far more people in work for longer, but the average retirement age has not kept pace with the state pension age. Based on the current trend, the country will fail to make the most of this huge potential.
By Jacob Holbraad, CEO of the Confederation of Danish Employers (DA)
Although the state pension age has been rising since 2019, the age at which Danes choose to retire has remained largely static. A new report by the Ministry of Employment shows that between 2019 and 2022, the average retirement age remained unchanged, at around 65.
Regrettably, the actual retirement age has failed to keep pace with the state pension age. We saw the impact of previous early retirement and state pension reforms in 2014–2019, when the employment rate for older people rose sharply and the average retirement age increased.
This positive trend has now ground to a halt, and we know why. It is largely down to the popularity of early retirement schemes – specifically, the introduction of senior and early pensions, which encourage people to retire earlier, depriving the labour market of their skills. The senior pension has been particularly popular with people who want to retire before reaching state pension age.
The positive trend has now ground to a halt, and we know why. It is largely down to the popularity of early retirement schemes.
While our Scandinavian neighbours do not have early retirement schemes, Denmark has three – the voluntary early retirement pension, the senior pension and the early pension.
As of March 2023, almost 75,000 people had availed themselves of these schemes. This is one of the main reasons older Danes are far less likely to be employed than their peers in Sweden and Norway.
If Denmark had as high a proportion of older people in work as our Scandinavian neighbours, almost 50,000 more Danes aged 60–69 would still have jobs.
Although the Government predicts a slight fall by 2030, the number of older people taking advantage of early retirement schemes is expected to remain high.
As the state pension age is not set to rise again until 2030, there is a risk that the average retirement age will stay the same throughout the decade. Given the current labour shortages and the clear potential for more older people to remain in work, this is a problematic scenario.
To avoid even more severe labour shortages in the future, we must make efforts to grow the workforce. That means finding new ways of encouraging people to keep working for a little longer.
Many MPs have reached similar conclusions but have yet to translate this newfound insight into tangible policy. The parties must come together as soon as possible to find a political solution that will significantly increase the number of older people in work. Reform of the senior pension scheme would be one way of achieving this.
Article published in Jyllands-Posten and Finans on 7 June 2023.