‘Living Longer, Working Longer’

Abstract

With the Danish life expectancy indexing of pensionable ages as case, this chapter examines to what extent a policy that objectively can help avoid recurrent conflicts as well as large economic and social challenges, can be deemed a success, even though it fits poorly with the PPPE model, as it was adopted, tightened, and continued without involving major stakeholders, and is neither fair nor popular. After briefly introducing the demographic challenges to pensions and explaining the positive potential of linking the pensionable age to developments in longevity, the chapter presents the paradoxes of the Danish case. In 2006 Denmark was a rather unlikely candidate to take a vanguard position in pension reform. Its economic situation and the fiscal health of the pension system in no way necessitated such a policy. Raising the pensionable age did not fit the priorities of most of the political parties that supported its initiation. Even more remarkable: the policy was tightened in 2011 by a government in which the main parties had campaigned against it and it was first implemented (2014) and later continued (2020) by other reluctant governments. Given these oddities, the focus is on explaining which constellation of circumstances and actors allowed such a novel pension policy to be adopted and continued, how this conditioning affected its design, implementation and longer-term effects, and assessing to what degree and in what ways it has been, is and may continue to be a ‘successful’ policy in certain dimensions.

Regulating the retirement age—Lessons from Nordic pension policy approaches

“…In fact, the reform did not just seek to secure the sustainability of the pension system, but aimed more widely at tackling budget deficits in the decades where aging peaks. As such it became an integral part of long‐term public budget planning, which turned out to secure its survival through several changes of governments and occasional eruptions of conflicts over retirement policy (von Nordheim & Kvist, 2022b).…”

“…A broad international literature indicates that health and remaining working capacity tend to improve at a markedly slower rate than average life expectancy. Consequently, we have elsewhere argued that a life expectancy indexing of the pensionable age like the Danish will increase social inequality among older workers and pensioners since the ability to postpone retirement and work longer—as well as remaining life expectancy itself—are very unequally distributed among occupations and across individuals (von Nordheim & Kvist, 2022a, 2022b). Similarly, we have suggested that the economic benefits of raising the pensionable age will decrease as the age go up and that certain age thresholds may prove difficult to transcend for social as well as biological reasons.…”

“…Following a sudden, seemingly continuous rise in life expectancy of people above 60 years a large majority in the Danish parliament somewhat reluctantly agreed a pioneering reform of the Danish retirement system in 2006 (von Nordheim & Kvist, 2022b). Since Denmark like Finland had developed a culture of early and premature retirement the reform very much also aimed at limiting and possibly breaking this.…”

“…3.4. Denmark tightens and advances the timing of its retirement reform while also backtracking Following the economic crisis of 2008-2010, a majority in the Danish Parliament in 2011 decided to further limit access to VERPS while also moving the implementation of the other elements of the 2006 reform agreement 5 years forward (Finansministeriet, 2011; see von Nordheim & Kvist, 2022a, von Nordheim & Kvist, 2022b.…”

“…The article concludes by discussing the implications of the Nordic experiences for reforms that seek to make people retire later. Pension reforms obviously have many aspects and a wealth of economic and social implications, but the focus of this article is limited to experiences with mechanisms aimed at extending working lives in line with developments in life expectancy (for a broader view of the effects of pension reforms see e.g., von Nordheim & Kvist, 2022a, von Nordheim & Kvist, 2022b).…”