The Pension Conversation
In conversations among the older generation, a familiar refrain often surfaces: How much will you receive in retirement? The answers, as diverse as the individuals themselves, are influenced by various factors—some are single, others married; some choose to continue working while others retire fully; some rely solely on pensions, while others benefit from pension schemes.
In a newly released report, the Department of Social Affairs, Labor Market, and Home Affairs sheds light on the economic implications of eliminating the current phasing-out rules for retirement pensions.
These tapering rules—often referred to as set-off—come into play when a pensioner, still active in the workforce, earns above certain thresholds. The department acknowledges that while the rules may seem straightforward in principle, in practice, they often confuse citizens about their actual monthly payments.
For those curious about the numbers: a single pensioner receives a basic pension of DKK 79,763 alongside a supplementary pension of DKK 87,012, totaling DKK 166,775 annually, or DKK 13,898 each month. However, if a single pensioner earns above DKK 162,934, the supplementary pension begins to taper off and disappears entirely once income reaches DKK 411,550. The basic pension follows a similar pattern, vanishing completely at income levels beyond DKK 610,949. Specific tapering limits apply for married pensioners, whether both are retired or just one.
As labor shortages plague multiple sectors, SIK’s chairman, Jess G. Berthelsen, views these barriers seriously. “Many of our members who have turned 67 wish to remain in the labor market but are discouraged by the tapering rules,” he states. “This affects us all; we’re facing labor shortages across the board, and it seems illogical to penalize those eager to contribute.”
Berthelsen advocates for the complete removal of the phasing-out rules, asserting that such a move would incentivize continued workforce participation among pensioners.
The financial implications of such changes cannot be overlooked. The abolition of all tapering for the basic and supplementary pension is projected to cost the national treasury between DKK 79 million and DKK 118 million annually until 2050. “The financial consequences are significant,” warns Bentiaraq Ottosen, the minister responsible for social affairs and labor. “This would come at the expense of other welfare services.”
Yet Berthelsen counters this notion, believing that the long-term benefits—more disposable income for pensioners and increased tax contributions from both wages and pensions—could offset the initial costs. “There’s potential for a win/win scenario that ultimately benefits both pensioners and society as a whole,” he argues.
On October 16, Mariane Paviasen Jensen of Inuit Ataqatigiit plans to present a motion in the Inatsisartut urging the government to propose changes to pension laws by the autumn assembly in 2026. Proponents of reform argue that pensioners should receive the full amount of old-age pensions without the penalties associated with additional income.
However, the Naalakkersuisut remains cautious, asserting that while fewer limitations could encourage more pensioners to work beyond 67, there’s no guarantee that this outcome will materialize.
The topic of inequality also looms large over this discussion. Ottosen contends that maintaining the phasing-out rules fosters equality among pensioners, while their removal risks creating a divide between those who can afford to work and those who cannot.
Berthelsen dismisses this idea. “If you’re concerned about inequality, you should look at the working population first. The discrepancies in the labor market are far more pronounced than any potential inequality among pensioners,” he asserts.
As the conversation unfolds, the issue of pensions is further complicated by the growing number of workers covered by collective agreements that include pension schemes, along with those bound by a mandatory pension scheme introduced in 2018. On November 11, Pele Broberg of Naleraq will propose a resolution to repeal this compulsory pension law, echoing sentiments raised before by other parliamentary factions.
Berthelsen emphasizes the necessity of a mandatory pension scheme, noting the demographic shifts—fewer workers supporting a rising number of retirees. “The realities of the coming decades will make it increasingly difficult to be a pensioner. Ensuring proper savings mechanisms in place is essential,” he warns.
To navigate these complex challenges, the Naalakkersuisut has established an expert group tasked with providing recommendations for comprehensive pension reform by 2026. As the dialogue progresses, the stakes remain high for pensioners, policymakers, and the broader society alike.