The Danish Parliament (Folketing) has adopted a bill to increase the state pension age to 70 from 2040.

The bill to raise the retirement age is a consequence of the 2006 Welfare Agreement, in which a broad majority in the Folketing agreed that the state pension age ensured a connection between life expectancy and retirement age.

Today's vote, which secured a majority, means everyone born after 31 December 1970 can retire when they turn 70.

The state pension age is currently 67, but it will increase to 68 in 2030 and 69 in 2035.

Minister of Employment, Ane Halsboe-Jørgensen, said it would be the "last time" Social Democrats voted for an increase within the current automatic system.

"There is a big difference between whether you start your working life at 16 or you are well into your 20s before leaving university. That is why we need a fairer pension system, which we will negotiate well in advance of 2030," she added.

According to the Pensions Act, the Danish Parliament must decide every five years whether to increase the retirement age if the life expectancy of 60-year-olds increases.

The state pension age was most recently increased in 2020 by one year to 69 years, effective from 2035. Previously, the retirement age was increased to 68 years in 2015, effective from 2030.

According to the Ministry of Employment, the current increase in the retirement age from 69 to 70 will strengthen public finances by approximately DKK 15bn by 2040.

In addition, a higher state pension age and, thus, later withdrawal from the labour market, will also impact pension savings.

Indeed, new calculations from Sampension showed that if you have an annual salary of DKK 400,000, pension savings of DKK 2m, and a pension contribution of 15 per cent, taking your state pension at age 70 instead of 69 would increase your pension savings by approximately DKK 128,000.

This would also mean that the pension savings (lifetime pension) payments will increase by approximately DKK 1,200 per month before tax.

"Although this is, of course, far from true for everyone here, we see that Danes are generally extending their working lives in these years," suggested Sampension chief adviser, Helle Dalsgaard.

"This development can be expected to continue in the future, not least in line with the increasing state pension age," he said.

"For the individual, a longer time in the labour market also makes a difference in their personal finances, including their pension savings, where later withdrawal means more years of contributions and returns.

"Overall, this means that savings are increased and that there is thus more to do good with as a pensioner," Dalsgaard argued.

Echoing this, PFA private economist, Camilla Schjølin Poulsen, said there was a lot workers could do to make the right transition to retirement.

Specifically, she stressed that they could strengthen savings with an extra year in the labour market.

"A year on or off the job market means more to the economy in retirement than many people might think," Poulsen continued.

"The biggest financial gain is the extra annual salary."

"In addition, there are two factors: You get an extra year of savings, and you may have a slightly shorter time in retirement, which increases the annual payment," she added.

---