The Danish pensions industry is paying out more than DKK 10bn annually in compensation for loss of earning capacity, Insurance & Pension Denmark (I&P) has revealed, amid growing concerns over the impact of attrition and illness on the industry. 

Analysis from I&P revealed that more than 86,000 Danes are receiving a payment for lost working capacity from their insurance or pension company after completely or partially losing their ability to work.

I&P head of health policy, Mie Rasbech, highlighted this as a "dramatic development", noting that, since 2022 alone, the industry has experienced a 20 per cent increase in the number of Danes leaving the labor market prematurely and receiving compensation for loss of earning capacity.

Although the largest proportion of savers impacted are older, I&P admitted that, "worryingly", many young people are also falling out of the labor market.

Indeed, since 2021, there has been an almost 40 per cent increase in the proportion of Danes under 40 who lose their ability to work.

I&P also noted that whilst attrition and illness affect a wide range of people, it is especially prevalent in industries with many skilled employees.

The financial impact of the rising number of those losing their ability to work has prompted growing concern from the Danish pension market, as both PFA and Velliv have also recently highlighted this as a key challenge for the pension industry.

This trend has also been seen across the European pension sector more broadly, with similar concerns also emerging in Finland and Estonia.

I&P revealed that the pension industry pays out more than DKK 10 billion annually in compensation for loss of earning capacity. Reducing the number of recipients will free up funds for pension payments when Danes retire.

"We need a joint effort to reduce the number of Danes who lose their ability to work," Rasbech said. 

"Every time an employee falls out, it means less money for pension savings - and more for compensation. And both for the economy and, above all, for the individual, it is an unfortunate development." 

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