Henrik Ramlau-Hansen, a former chief executive officer of Danica Pension, has made the eye-catching assertion that early retirement on the basis of excessive pension assets is a real problem in Denmark - but the country’s pensions lobby disagrees.
In a column in the newspaper Berlingske, Ramlau-Hansen - now a professor at Copenhagen Business School (CBS) - said despite Denmark’s shortage of workers, which the already-stretched government was aiming to tackle, many people increasingly wanted to decide for themselves when to retire.
He cited Morten Hübbe, until recently CEO of Nordic insurance group Tryg, who had opted to retire at 51.
Ramlau-Hansen said it was important to avoid a large proportion of people leaving the labour market several years before the official retirement age, according to the text of the column submitted to the newspaper.
“This can only be ensured if the pension system is set up so that it does not encourage premature retirement,” the CBS professor said.
Denmark’s planned increases in the retirement age created a financial opportunity for many to retire earlier than the stipulated age, because of the extra years of pension contributions they would pay over longer working lives, he argued.
Hiking the state pension age according to the principle of maintaining the same average expected lifespan in retirement led to a risk of “over-savings”, he said.
“It should therefore be a task for the government and the social partners to look at the size of pension contributions in connection with the next update of the retirement age in 2025,” said Ramlau-Hansen, who was CEO of Danica Pension between 2000 and 2010.
“If there are no changes, one of the world’s best pension systems could turn out to be standing in the way of the healthy development of the Danish economy, if Danes take full advantage of the extra opportunities for early retirement,” he said.
Solutions put forward by Ramlau-Hansen in his academic paper on the topic published in the journal Finans/Invest, co-written by Mads Brink, Ramlau-Hansen’s post-graduate research assistant, include reducing pension contributions as the retirement age increases, or starting pension savings later - for example, 10 years into a working life.
But pensions industry lobby group Insurance & Pension Denmark (IPD) responded by dismissing Ramlau-Hansen’s argument that early retirement on the basis of large volumes of pension assets was a real problem.
“Right now, we are on our way to building a super-solid foundation for future pensioners - skilled and unskilled, short and long-educated,” said IPD’s CEO Kent Damsgaard.
“It is a finely-calibrated model, and we must be careful about changing it, just because there is a concern about possible early retirement.
“Pension savers will not suddenly become so rich that they can retire when they want - but they will be able to enjoy their retirement without worrying about their finances,” he said.
All the figures showed Danes were working longer in line with higher retirement and state pension ages, he said, adding that it was in fact precisely the highly-educated and those with the highest pension assets who retired latest.
The fact that a small proportion retired early on their own resources was already included in the Ministry of Finance’s projections, the IPD chief said.
IPD also published an analysis alongside Damsgaard’s response, to show that early retirement was not attractive for ordinary wage earners in Denmark’s mature pension system.
Read the digital edition of IPE’s latest magazine
No comments yet