Pension Commission recommends slower increase in standard retirement age

VS – 06/2022

On 4 May, the Danish Pension Commission presented its final report. One of the recommendations is that the standard retirement age should rise more slowly in future. The Pension Commission also advocates that the same standard retirement age should apply to all occupational and socio-economic groups.

The Pension Commission was established in 2020 under the chairmanship of former Minister of Labour, Jørn Neergaard Larsen. In particular, it will look at the advantages and disadvantages of differentiated standard age limits, examine the relationship between the development of life expectancy and healthy lifespan for different socio-economic groups and analyse the effects of a slower increase in the standard age limit from 2040.

Pension system should become fairer across generations

The aim of the pension commission is to make the pension system fairer across generations. According to the currently valid regulation, the pension phase is the same for all generations. The inevitable consequence of this is that future generations will have to work longer than current pensioners as life expectancy increases. Nor is it certain that people will still be healthy enough to work at an advanced age.

Furthermore, the Pension Commission considers it problematic that the previous formula for calculating the standard retirement age is based on the increase in life expectancy from the age of 60, whereas the standard retirement age today is 67. Thus, increases in life expectancy below the statutory retirement age are also included in the calculation. Thus, the increase in life expectancy from the standard age limit is overestimated. The consequence is that the actual pension phase will be lower than calculated in the future. 

Standard retirement age continues to rise albeit at a slower pace

Against this background, the Pension Commission proposes a slower increase in the standard retirement age from 2045. To this end, the increase in life expectancy from the respective valid standard age limit is to be used in the calculation formula for the standard age limit. The increase in life expectancy calculated in this way is to be divided 80 per cent and 20 per cent between working life and retirement respectively. As a result, the standard retirement age would rise from 67 years today to 74 years instead of 77 years by 2100.

No different standard age limits for individual social groups

According to the Pension Commission, there are large differences in the life expectancy of different social groups. People with a low level of education and in physically demanding jobs have a significantly lower life expectancy on average than academics. However, the Pension Commission is of the opinion that this question of justice should not be regulated by different standard age limits of social groups. Instead, this must be addressed through rehabilitation, disability pensions, occupational health and safety as well as qualification and further training.

Incentives to work in old age and saving for retirement

The Pension Commission also recommends creating the possibility to interrupt the pension phase to take up gainful employment. Incentives must also be created to ensure that everyone makes sufficient provisions for the retirement phase.