As Denmark moves to raise its state pension age once again, Insurance & Pension Denmark head of pension policy, Lotte Katrine Ravn, argues that greater flexibility in both the labour market and pension system is essential to ensure a fair and sustainable path forward

In April, the Danish parliament once again discussed plans to raise the state pension age. As of now, the pension age is 67, and by 2040 it will increase to 70. Every five years, the Danish parliament votes on whether to adjust the pension age in accordance with the longevity indexation mechanism introduced in 2006. This system links the state pension age to increases in life expectancy. The longevity indexation has been a cornerstone in ensuring both high labour force participation and the long-term sustainability of public finances.

Alongside the 1987 agreement that expanded labour market pension schemes across wide segments of the Danish workforce, the 2006 longevity indexation has played a critical role in shaping the resilience of Denmark’s economy and welfare model. These reforms have strengthened public finances by increasing labour supply and reducing state pension expenditure.

In recent years, employment rates have risen, particularly among older workers. The retirement age has increased across all educational groups: Unskilled and skilled workers now retire, on average, 3.8 years later than in 2010, and individuals with higher education have seen a 2.8-year increase, reaching an average retirement age of 67.9 – nearly one year above the current state pension age.

If life expectancy in Denmark continues to rise in the coming decades, the state pension age is expected to follow suit. However, there is currently political debate over whether the automatic indexation should be modified to slow the pace of future increases. This debate stems from concerns that many workers may not be able to remain in employment into their 70s. Additionally, the current system risks exacerbating intergenerational inequality.

At Insurance & Pension Denmark (I&P Denmark), we are committed to supporting a society where individuals can work as long as they are willing and able. At the same time, there must be a publicly funded early retirement option for those who, due to health issues, cannot remain in the workforce until the official retirement age. Today, more than 80,000 Danish seniors continue to work beyond the state pension age – a historically high number.

We believe that one of the key enablers for encouraging people to stay in the workforce until – and beyond – the state pension age is to promote greater flexibility in the labour market and within the pension system. For example, older workers could reduce their working hours or take a weekly day off, with the option of supplementing their income through partial withdrawals from private pension savings.

This approach is also gaining traction in collective agreements. As of spring 2025, the parties to collective agreements in large parts of the private sector have increased the ‘optional benefits account’ (fritvalgskonto) from 9 to 11 per cent of salary. Employees can decide whether these funds are used for additional pension savings, paid out as salary, or converted into extra days off. For seniors, this means, for instance, the possibility of taking a day off per week.

I&P Denmark advocates for more flexible withdrawal options for private pension savings, allowing seniors to access their pensions in a way that suits their individual needs and to pause pension payouts if they decide to return to the labour market after having initially retired.

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