More than expected likely to forego early retirement scheme
April 3, 2012 - 12:17
Many are looking to get their efterløn contributions repaid in the wake of last year’s programme cut backs and the recession
Around 200,000 Danes are set to receive their early retirement benefits this week, but figures indicate that up to 400,000 are choosing to leave the programme early.
Efterløn is the state run welfare mechanism that allows Danes to withdraw from the job market five years before retirement age, but following a reform in December 2011, this duration will be gradually shortened to three years.
Starting yesterday, it became possible for people who have been making contributions to personal efterløn accounts to withdraw from the programme and receive their contributions in one tax-free lump sum. They can do this until October 1.
An analysis by pension fund Danica and survey institute Userneeds has predicted that seven out of ten Danes have made a decision on their efterløn and about 40 percent of them have decided to withdraw. If these predictions hold true then 70,000 more Danes will collect early than the Finance Ministry had estimated.
Many of those who had made their decision to withdraw their payments cited the dismal economic situation as part of the reason for their decision.
The trend of opting out early could provide the stagnant economy with a much needed boost of approximately 17.5 billion kroner, although Peter Birch Sørensen, a former chair of the government's economic advisory panel, said not to expect any radical growth because of it.
“It may provide some stimulus to the private sector, but probably not enough to create a considerable upswing,” Sørensen told Jyllands-Posten newspaper.”Especially if people only use the money to reduce their debt.”
The survey also showed that the typical person opting to withdraw from efterløn is male, under 50, from northern or eastern Zealand, in a highly skilled job or owning his own business, and earning over 500,000 kroner a year before tax.
Conversely, the results indicate that those deciding to remain in the efterløn programme are most likely to be women from Funen or Jutland working unskilled jobs and earning less than 300,000 kroner before tax.