Our column Inside Denmark takes a closer look at the stories we’ve been talking about over the last seven days. This week, a huge debate about (relatively) early retirement.
Last week it was wealth taxes, this week it’s pensions: Prime Minister Mette Frederiksen’s campaign for reelection as prime minister is marking out clear dividing lines in Danish politics.
As we wrote about in last week’s edition of this newsletter, Frederiksen’s proposal to introduce a wealth tax as part of the Social Democratic party’s election platform was quickly rejected by the rest of the coalition government. The Moderates and the Liberals both made it clear they want no part of the idea.
Debate about wealth tax continues, while Frederiksen this week announced an update to a signature policy from elections past: the ‘Arne-pension’.
The early retirement scheme, commonly known as the Arne-pension, was a prominent part of the Social Democratic party’s campaign platform when it was elected in 2019, and was passed into law in 2021.
The initial version of the scheme was designed to allow people who have worked long careers in physically demanding jobs to retire early by letting people aged 61 or older who have spent more than 42 years doing certain physical jobs retire before the age of 67.
The age at which the early retirement can be taken is set to increase in years to come, alongside the general retirement age, which is also scheduled to increase.
People born from 1965 onwards will be able to apply for the early pension at 62, while that increases to 63 for people born from 1969 onwards. The number of years needed on the labour market to qualify increases concurrently.
READ ALSO: Denmark formally raises retirement age to 70 in 2040
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When the Social Democrats on Thursday presented their pension proposals, an extension of the access to early retirement – the Arne-pension – was a prominent feature.
“We have to deal with the fact that our working lives are different,” Frederiksen told TV2.
Proposed changes to the rules will change the existing age limits on who can get the early pension and prevent it from ever exceeding 66 years. That replaces the current structure under which the right to the Arne-pension follows both the length of time spent working and the existing retirement age.
This means that under existing rules younger people will have to wait longer before taking the pension because the retirement age is also increasing.
Under the current projection, a person born in 1999 would not be eligible for the pension until age 71 – quite an age for an ‘early’ retirement.
The new proposal adjusts the rules, bringing this earlier retirement back down to 66.
Meanwhile, the pension scheme could be broadened so that more trades and professions qualify for it.
The Social Democrats have not outlined how they expect to pay for the additional state pensions this would require – a fact quickly picked up on as employer organisations raced to condemn the plan.
Additionally, Frederiksen’s party wants to break with the longstanding model by which the retirement age increases in line with life expectancy. Instead, retirement age would go up by six months every year by which life expectancy increases.
The Confederation of Danish Industry (DI) accused the Social Democrats of “gambling with the Danish economy” with the proposal.
“The Social Democrats should reward seniors for their willingness to work instead of pulling thousands of healthy employees out of the labour market,” the business organisation said in a statement.
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The group questioned the logic of offering an early pension for physical work to more people.
“The target group for the Arne pension is being significantly expanded, which makes little sense. Healthy people are being approved for the Arne pension, and only a quarter of those currently approved for the scheme actually use the option,” director of labour market affairs and employment law at DI Søren Kryhlmand said in the statement.
“There is no need to expand it when so few people take advantage of it,” he said.
The organisation for managers and executives, Lederne, also criticised the proposal, similarly arguing that it would pay too many “healthy” people to retire early.
An entirely different sentiment could be found in the statements released by trade unions, with confederation FH calling it “a good day for all wage earners, especially those with the longest and toughest working lives.”
Allowing people to leave the labour market while their health is still good is entirely justified, the unions argued.
“Many wage earners have worked night shifts in elderly care, stood on scaffolding in all kinds of weather, or spent four decades in public kitchens. They should have the opportunity to step away while they still have good health, and have time to enjoy a good life afterwards,” confederation leader Morten Skov Christiansen said in a statement.
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These polarised reactions to the Social Democratic proposal come from the labour and business world, not from other political parties – who will also get their chance to have their say on the policy as the election approaches.
In this case, it seems clear enough without the other parties needing to say anything: the Social Democrats are placing themselves as a traditional party of the workers in what seems a very clear strategic election choice.
Last week’s wealth tax and this week’s pensions proposals make that very clear.