How will the new government platform affect your pension scheme?

Here are the points we at Velliv consider most relevant for those of you responsible for employee pension schemes — and how we see them. 

1. Greater flexibility in retirement

The Government aims to make it easier to gradually wind down working life. This includes two specific changes that Velliv has advocated for:

1. The ability to pause contributions to annuity certain schemes if you return to the labour market, and 
2. The option to begin pension payouts up to five years before reaching the state pension age. 

Both measures give your employees better opportunities to spread their income over time, which may lead to lower tax as well as reduced reduction in benefits such as the pension supplement and housing benefit. 

2. Career transition account

The government aims to establish a career transition fund to support reskilling and career changes throughout working life. 

Velliv supports the possibility of changing direction during what is expected to be a long working life. We therefore propose allowing pension customers to set up dedicated career transition accounts as part of their pension savings, to which portion of their contributions can be allocated. The funds would be earmarked for education and training that genuinely strengthen labour market participation and the ability to remain in employment until state pension age. If the funds in the transition account are not used, they'll instead form part of the individual's overall pension savings, allowing the customer to benefit from them in retirement.

At Velliv, we have long supported a more flexible working life, where people can free up time for other purposes along the way. However, in our view, this must not come at the expense of individuals’ financial security in retirement — or shift the burden onto younger generations. 

"We support investing pension savings in people and new skills, but we don't support turning pension savings into a fund to be drawn down for consumption during working life. A pension should provide security once working life comes to a close," Kim explains.

3. Prevention and stress

The government intends to engage in dialogue with the pensions sector on improving support before, during and after stress-related sick leave. This is a positive development. Prevention is one of the areas where the pensions industry is particularly strong, not least through collaboration with you as employers. 

“Prevention and early intervention is an area where we excel. We've seen how early intervention, for example in cases of stress, helps employees remain in work. We're ready to contribute that knowledge as the politicians shape the new initiatives,” Kim adds. 

4. Taxation

On the tax front, fortunately no major changes to pension savings are currently proposed. Tax relief on pension contributions is maintained and will be included in the work of a forthcoming commission. However, two points are worth noting. 

First of all, a number of tax thresholds will be frozen for two years, which will gradually erode the real value of the limits for schemes such as annuity certain and old-age savings schemes. 
Second of all, tax on free (non-pension) savings will be eased, including a higher limit for share savings accounts. 

Taken together, these changes could shift the balance between saving within pension schemes and saving outside them. This may be problematic, as Denmark’s stable and predictable pension framework supports long-term financial planning for employees. 

5. Reintroduction of store bededag

For employers, it is also worth noting that the reintroduction of the public holiday store bededag is under consideration. Regardless of the final model, this could reduce labour supply and create administrative complexity if the related compensation arrangements are to be revisited. 

Positive direction – but key details to come

Overall, the government platform points in a direction we broadly welcome: greater flexibility towards the end of working life, a stronger focus on prevention, and an ambition to reduce regulatory burdens for businesses. 

At the same time, much of the real impact will depend on the outcome of upcoming commissions and negotiations. We are following developments closely and will continue to keep you informed about any changes affecting your pension scheme.