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How long is life on pension for people from different socio-economic groups in Denmark? How large are the differences and can we expect them to widen or remain the same in the future?

Our new findings are highly relevant to the current debate about the fairness of the Danish pension system. We look at the differences in years spent in pension by five socio-economic groups today and the likely distribution in the future.

By Jana Vobecká, , 3/2/2020

New paper from our very own Søren Kjærgaard, Marie-Pier Bergeron-BoucherJim Oeppen and co-authors.

Following a pension reform from 2007, the pensionable age in Denmark has been linked to the life expectancy of the total population. However, the total life expectancy masks differences between individuals and groups. Mortality and life expectancy differ across socio‐economic groups and future changes in mortality will determine whether only some socio‐economic groups will drive increases in the retirement age, leaving other groups increasingly behind with fewer pensionable years. If the pace of change in life-expectancy across socio-economic groups remains the same in the future, the fairness of the system will not be affected by the 2007 pension reform.  If on the other hand, life expectancy differences across socio-economic groups will widen, it would imply larger inequality in the number of years that people can expect to enjoy their pensions.

The results show that Danish males in the lowest socio-economic group (defined by individual’s income and wealth) have a remaining life expectancy at pension age of around 16 years in 2016. That is 4.5 years less than among the 20 % of the most well-off Danish males. The other groups fall between with remaining life expectancy from around 17 to 19 years in 2016. For Danish females the two lowest socio-economic groups have the same remaining life expectancy at pension age at around 19 years in 2016, which is 4.5 years less than in the most well-off group.

Finding 1: All groups today, for both males and females, have a life expectancy more than 14.5 years, which is the desired long‐term goal in the current pension scheme. Thus, people from all socio-economic groups can expect to enjoy a public pension longer than the years desired by politicians in the 2007 pension reform (if they retire at the statutory retirement age).

Finding 2: Analysis of the future trends in mortality differences and life expectancy shows that the Danish pension reform of 2007 does not introduce further inequalities than the ones already observed. Mortality differentials between socio-economic groups will persist in the future but in the most likely scenario they won’t be widening.

This research was conducted by a research team from the Interdisciplinary Centre on Population Dynamics of the University of Southern Denmark and Aarhus University.

Søren Kjærgaard, main scientific author, skjaergaard@sdu.dk, Interdisciplinary Centre on Population Dynamics of the University of Southern Denmark

Kjærgaard, S., Ergemen, Y.E., Bergeron‐Boucher, M.‐P., Oeppen, J. and Kallestrup‐Lamb, M. (2020), Longevity forecasting by socio‐economic groups using compositional data analysis. J. R. Stat. Soc. A. http://dx.doi.org/10.1111/rssa.12555