Insurance and Pension Denmark (I&P Denmark) is concerned about the DKK 8bn that pension companies are paying out annually in compensation for loss of earning capacity.

The association said every month pension companies pay compensation to more than 73,000 Danes who have lost their earning capacity. In recent years, there has been a sharp increase in the number of Danes receiving compensation for loss of earning capacity: From just under 67,000 in Q1 2021 to over 73,100 in Q1 2023 – an increase of almost 10 per cent in two years.

"Compensation for loss of earning capacity constitutes an increasingly large part of many pension companies' payments, and they are an important part of the safety net and security for Danish employees,” I&P Denmark pension director, Jan V. Hansen, said.

He added that the rising figure is a “worrying development” but highlighted that the rise is particularly linked to an increase in the number of Danes on senior and early retirement pensions.

“A very large part of the increase in compensation for loss of earning capacity is due to the strong influx of public schemes, such as senior pensions and early retirement. So, it is not only the public sector that has increasing costs for these schemes. It also has major spin-off consequences for pension companies," he said.

He warned that it could have an impact on pension savers: “The compensation for loss of earning capacity is an insurance scheme that is part of virtually all Danes' pension package. So, if a pension company has very large expenses for lost earning capacity, the rest of the pension savers help to bear that risk and burden – so there will be less money to pay out in old age. Therefore, it really is a development that we must keep a close eye on.”

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