Denmark’s Pension Commission has published a report with recommendations for improving the country’s pension system, which Insurance and Pension Denmark (I&P Denmark) has welcomed.

The commission was set up in November 2020 to make recommendations for the pension system of the future. This report has now been submitted to the government and the parties behind the pension agreement.

I&P Denmark said it welcomes the long-awaited recommendations and hopes that politicians follow up on proposals to improve incentives to save for retirement, which is crucial for future-proofing the Danish pension system.

I&P Denmark CEO, Kent Damsgaard, said: “We completely agree with the Pension Commission that there is a need for a unified, sharp and independent pension policy in Denmark, so that in the future we still have one of the world's best pension systems.

“The commission has looked at the pension system at the seams, and they, like us, are concerned with improving the incentives to save for retirement and making the individual Dane's withdrawal from the labour market more flexible.

"We are pleased that the Pension Commission is proposing to improve old age savings and increase the additional pension deduction. It is also quite obvious that politicians make it possible to pause an instalment pension so that able-bodied seniors can return to work without being penalised financially.”

The commission has proposed to improve pension savings, by removing the set-off when contributing to old-age savings. It has also proposed to allow pension savers to contribute a higher amount for seven years, rather than the current five years, which provides more incentive to save for retirement.

This will mean that the so-called real effective marginal tax will fall from more than 80 per cent to just over 25 per cent. I&P Denmark estimates that there are around 22,000 more people who will benefit from being able to pay the high amount into old-age savings in the future.

“It is absolutely central to the pension system that it pays to save for retirement, so the proposal really hits the spot,” Damsgaard said.

However, the Commission is also proposing savings of 3.3 per cent of the income of employees and the self-employed who do not save for retirement themselves. According to I&P Denmark’s assessment, this will result in a modest contribution to the maintenance in retirement of approximately DKK 1,300 per month after a full working life savings. A regular pension scheme of at least 12 per cent, which is the norm in virtually the entire labour market, is a much better solution, the association said.

“A savings of just over 3 per cent is not an alternative to a regular pension savings, but if the proposal becomes a reality, it may contribute to more Danes considering the importance of having a real pension savings Therefore, it is obvious that such a new minimum savings could be placed in the well-known pension companies,” Damsgaard said.

Commenting on the report, Danish Minister for Employment, Peter Hummelgaard, said: “I would like to thank the commission for withdrawal and attrition for a great deal of work in thoroughly analysing the Danish pension system. I and the government look forward to reading the recommendations closely.

“The Danish pension system is unique in the world and I note that the commission agrees with me. Our pension system ensures that the retirement age does not equate to tight financial conditions, we must stick to that. But of course, we must constantly look at the system and assess whether there is broad support for it and whether it can be improved in a financially responsible way.”

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