The latest old-age pension reform aims to create stronger incentives for postponing retirement and to improve the pension savings for persons in the later years of their career. The trade unions have criticised the measures as being half-hearted.

The Danish pension system is characterised by high (and growing) household savings in the form of pension funds held in equities and bonds (see also our background summary). As a consequence households are in a position to keep up their purchase power even after retirement. The funds are accessible only upon retirement, and mostly through monthly instalments. Denmark implemented a number of pension reforms in recent years. In the 2011 ‘Retirement Reform’, the voluntary early retirement scheme was reduced from 5 to 3 years. The scheme was made so financially unattractive that it phased out.

However, the pension system kept two widely-acknowledged problems in pension provisions resulting from the interaction between the public and private pension pillars. First the coverage, with 20-25% of the working population being not covered by the second pillar of occupational pensions and, thus, with low supplementary pension pay. Secondly, the fact that low to middle income workers, covered by occupational pensions, can have little benefits from their accumulated savings during the last decade on the labour market, as the growth of extra private pension entitlements can result in a reduction of the pension income-tested part of the universal national old-age pension (ESPN Flash Report 2017/48).

On 20 June 2017, the government came up with several changes related to pensions and retirement. To reduce savings disincentives for workers and to postpone retirement and prolong working lives, the agreement sets the annual maximum contribution that can be paid into old-age savings without leading to reduction in the pension income-tested part of the national pension. In line with the growth in life expectancy, the maximum duration of annuity pensions will be increased from 25 to 30 years. The reform received no warm applause. The trade union confederation LO spoke about a narrow and socially unjust measure that is only half a solution of the signalled problems. Other trade unions labelled the measures unclear and expensive for the insured, whilst some pension funds talked about an unfair and inadequate provision.The changes will come into force on 1 January 2018 or on 1 July 2018.