Danish pension future looks bleak

A rising pension age combined with a widening gap between the rich and poor could spur a move away from the welfare system by 2050

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August 28th, 2012 8:07 pm| by admin
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A new report by the Organisation for Economic Co-operation and Development (OECD) has indicated that by 2050, Denmark will have the highest pension age among 34 of the wealthiest nations in the Western world. Danes will also have the fewest number of years to enjoy their retirement: 17 years for men and 20 years for women on average.

The OECD estimated that by 2050, Denmark will, along with Italy, have a pension age of 69, the highest among all OECD countries. Similarly, the government's recent  2020 plan added an extra two years to the current retirement age of 67 for those born after 1958 in a move that generated little public debate.

The Ministry of Finance goes even further, predicting a pension age of 71.5 in 2050, a difference from the OECD estimate that is attributed to an alternate prediction model.

“We are the vanguard when it comes to the pension issue. Nobody else has gone to the lengths that we have,” Jørgen Goul Andersen, professor at Aalborg University, told the weekly newsletter Ugebrevet A4 weekly. “I don’t think that the public have quite realised what has been ratified.”

The national pension dilemma stems from 2006 when the government decided to regulate the pension age in correlation with lifespan estimates, resulting in pension ages rising jointly with life expectancies. The longer Danes live, the longer they work.

That paradox has quickly become a catalyst to a class struggle that could spell the end of the welfare system in the future. Due to a widening gap between the life expectancy of the unskilled worker and the wealthy, unskilled Danes will subsequently have less time to enjoy the golden years of their retirement.

Henrik Brønnum-Hansen, a professor at the University of Copenhagen's health science institute Institut for Folkesundhedsvidenskab, believes that Denmark is in the midst of a grim class struggle.

In March, in cooperation with the economic and political think-tank Arbejderbevægelsens Erhvervsråd (AE), he published a report conveying that the richest quarter of Danes in 2011 could expect to reach 82 years, while the poorest quarter could hope for 72 years, a difference of a decade.

But the alarming thing, according to Brønnum-Hansen, is that the difference has nearly doubled in the past 25 years, from 5.5 years in 1987.

"There is every reason to believe that the average lifespan will increase in the future. The question is whether the social inequality in life expectancy will also expand,” Brønnum-Hansen told A4. “Until now, the issue has only been discussed but something radical must be done. The poor simply have less healthy years compared to the well-off.”

It is precisely this growing lifespan inequality that could lead to troubles for the current Danish welfare principles, argued Ove Kaj Pedersen, a professor at Copenhagen Business School. As opposed to the past, today’s generations have come to expect a more extensive life after retirement.

“The question is whether the welfare expectation will prompt reaction to the collective agreements in the future,” Pedersen told A4. “Until now, the discussion has focused on us working more, but it hasn’t touched on pensioners enjoying a considerable remaining lifetime. The pension age, lifespan and post-retirement life will most likely become one of the major conflict points of the future.”

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