The recalibration of the Danish old‐age pension system

Abstract

Pension reform in Denmark in the 1990s is of general interestowing to the development of a system of funded, defined contribution pension schemes based on collective agreement between the parties in the labour market. The resulting pension system seems to hold some answers to the critique of funded pension schemes. This paper analyses the process which led to the 1991 pension reform and relates the discussions and solutions found in Denmark to the international debate on pension reform.C on trary to what is nor mally seen in descrip tions and anal y sis of the Nordic wel fare model, this paper deals with the fact that for a num ber of rea sons, Den mark, com pared with other Nordic and Euro pean coun tries, has been a late comer in the cre ation of a com pre hen sive old-age pen sion scheme. 1 Pen sion reform has been high on the agenda of wel fare reform in many coun tries, for more than 15 years. Owing to demo graphic devel op ments numer ous coun tries in the 1990s strug gled with reform to make their pension sys tem finan cially sus tain able. For many of them the strug gle has not ended. Den mark is fac ing the same chal lenges as other coun tries in this area of the welfare state. © In ter na tional So cial Se cu rity As so cia tion, 2003 In ter na tional So cial Se cu rity Re view, Vol. 56, 2/2003 Pub lished by Blackwell Pub lish ing 65 This pa per is part of a pro ject sup ported by the Dan ish So cial Sci ence Re search Coun cil and the Dan ish Na tional In sti tute of So cial Re search. With out the help of my re search as sis tants Mette Bastholm, Ulla Andersen and Dorte Boesby I would not have been able to work con tin u ously on the pro ject. My col leagues at the Cen tre for Wel fare State Re search Jon Kvist and Hans Hansen have gen er ously lis tened to sug ges tions and ques tions dur ing the pro cess. Di rec tor Gen eral Torben Möger Petersen from PensionDanmark has most gen er ously given me ac cess to data on Dan ish oc cu pa tional pen sion funds and also com mented on an ear lier draft of the pa per. The Rob ert Schumann Cen tre at the Eu ro pean Uni ver sity In sti tute in Flor ence pro vided me with an of fice dur ing the sum mer of 1999, en abling me to con cen trate on the pro ject for a lon ger time. Fi nally, my sec re tary Lotte Rener has tried to cor rect my Eng lish. But as al ways, er rors and omis sions can only be blamed on me. 1. A descrip tion of the Dan ish pen sion case is found in qverbye (1996).

Three Routes to Pension Reform: Politics and Institutions in Reforming Pensions in Denmark, Finland and Sweden

“…The Social Democratic (S) cabinet made a bill in 1964 on a supplementary pension scheme (ATP). In contrast to the other Nordic countries, the Danish ATP scheme was a flat‐rate system where benefits were related to the number of years in employment (Nelson 1984; Ploug 2003; Ølgaard 2005). In 1966–7, the S cabinet tried to introduce a Swedish‐style earnings‐related pension scheme, ‘ITP’, but failed.…”

Governance and Stakeholder Involvement in the Dutch Pension Industry, Lessons for Developing Countries

“…The first pillar consists of the state pension, which is a basic provision for all people beyond 65 years. First‐pillar pensions in the Netherlands are not means tested like in Denmark (Ploug, :73). When the first pillar was created in the 1950s, the population over 65 years in most developed countries was slightly above 10%.…”

“…Retired participants in particular contest the proposed changes because they prefer certainty over risk and do not want to face the risk of a nominal benefit cut that cannot be excluded in the proposed system. International developments for companies with respect to accounting; examples from other countries, such as Denmark and Australia (Ploug, ), and labour market developments within the Netherlands show a tendency toward future DC systems. Youth branches of political parties have proposed setting up a DC‐based system with risk sharing on longevity.…”

Modern Social Democracy and European Welfare State Reform

“…Nevertheless this was the decade which, according to Goul Andersen (2001a) witnessed a`silent revolution' in the Danish welfare system, particularly regarding successive labour market policy changes and potentially path-breaking reforms in pension systems (see also Ploug, 2000). Yet hardly any reforms of signi®cance were introduced.…”

“…By contrast, since the early 1990s the level of economic pressure on the system had considerably subsided. Nevertheless this was the decade which, according to Goul Andersen (2001a) witnessed a`silent revolution' in the Danish welfare system, particularly regarding successive labour market policy changes and potentially path-breaking reforms in pension systems (see also Ploug, 2000). Party competition, changing motives, interests and ideas on the part of political actors, the dominance of social policy discourses around concepts such as`structural unemployment' and the capacity to implement reforms, rather than socioeconomic context, are crucial explanatory factors (Goul Andersen, 2001b).…”