Do politicians still have power over when we retire?

Do politicians still control when we retire?

While politicians battle over the retirement age, the labour market has largely solved the problem already.

The Social Democrats want to slow the rise in the retirement age and create special schemes for people in physically demanding work. A noble aim. But here is the nuance I have yet to see in the debate: workers in those jobs can already do exactly that, provided their pension savings are managed properly.

For years, many of the occupational groups the politicians are talking about have had mandatory pension contributions written into their collective agreements. Those contributions deliver precisely what the Social Democrats are asking for: the option to retire after around 40 years in the labour market, without a single krone from the state.

Take the scaffolder as an example

A male scaffolder today contributes 12.75% of his salary under an agreement negotiated by 3F. On an average salary of DKK 48,000 a month, he will have saved roughly DKK 6 million by retirement (inflation-adjusted). That works out at around DKK 36,000 a month across the 17.5 years he can statistically expect to live in retirement. And that is before the state pension and ATP.

He is far from alone:

• Carpenters, concrete and reinforcement workers, floor layers: 13%

• Care workers (SOSU): 12.6%

• Plumbers and painters: 13%

Politicians have already lost control of the retirement age, because the social partners wisely took the responsibility on themselves. For future generations in these trades, the state pension is effectively a bonus, not a necessity. The real discussion concerns those who already have 40 years or more behind them, from an era when contribution rates were lower. They deserve a solution. But does it make any sense to dictate a state pension age to generations that have already provided for themselves?

The problem is not whether we save. It is how.

There is another problem in this debate, and nobody is talking about it: are Danes' pension savings working hard enough for the people who own them?

In 2019, the Danish Competition and Consumer Authority published a report with 22 clear recommendations for strengthening competition in the pension market for the benefit of consumers. Only a handful have been implemented since, and the report seems to have been forgotten in the political debate. CBS research found last year that pension savers collectively lose out on around DKK 30 billion in returns a year, or DKK 15,000 per saver, because of high costs and weak competition. That is six times as much as the DKK 4.6 billion the Social Democrats' proposal on differentiated retirement ages is expected to cost by 2035.

So the question politicians should be asking is not only when Danes can retire, but whether we are building a good enough framework for how the money saved over an entire working life is actually managed. The Competition and Consumer Authority showed seven years ago that the answer is more competition.

We are still waiting.