The number of Danes receiving compensation for loss of earning capacity through their pension scheme has risen by 27 per cent in four years, research from Insurance and Pension Denmark (I&P Denmark) has found.

The study showed that the number of people receiving ongoing compensation for loss of earning capacity increased from around 70,000 in 2021 to almost 89,000 in 2025.

According to I&P Denmark, this development is mainly driven by physical wear and tear among seniors, while an increasing number of young people lose their ability to work due to mental disorders.

At the same time, annual disbursements have increased from DKK 8.4bn in 2021 to DKK 10.3bn in 2024.

I&P Denmark CEO, Kent Damsgaard, said: “We can see that we are facing several challenges. We must become better at preventing physical wear and tear among
seniors and mental health problems among younger people.

“If more people are to stay longer in the labour market, it requires a much stronger effort for prevention and retention.”

The study also highlighted that the socio-economic consequences of this development are significant.

It explained that every time a young person under the age of 40 loses his or her ability to work, the expected future costs may be significantly higher than for older recipients, because the payments can run for many years until retirement age.

For example, the calculated potential cost per award is almost seven times higher for a person under 40 years of age than for a person between 60 and 64 years of age, which I&P Denmark said are funds that “eat into the total pension wealth”.

"Fortunately, there are still relatively few young people who lose their ability to work. But when this happens, the consequences are great both for the individual and for society. Therefore, the increasing development among young people is something we must take very seriously,” Damsgaard added.

I&P Denmark explained that loss of earning capacity insurance is part of most retirement plans and serves as a financial safety net for individuals who lose the ability to work due to illness, mental illness, or attrition.

Given that approximately 93 per cent of Danish employees contribute to a pension scheme, most employees are covered by this.

However, it warned that if the trend continues, the labour market, the health service and the pension system will all be affected.

Therefore, I&P Denmark argued that there is a need for increased focus on prevention, early intervention and retention of employees on sick leave, so that fewer people end up losing their connection to the labour market, either partially or fully.

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