Both employee and employer are charged the maximum contribution rate of 3 percent for 2-benefit portion (old-age pension
and child allowance), but the government contributes only 1 percent.
(4) For information about the state old-age pension
, see page 40.
Hence when old-age pensions
were introduced by the subsequent Liberal government of Richard Seddon there was little problem with financing them: they were paid for out of the surplus.
The first decision (Case C-499/08) aimed to clarify the case of Ole Andersen, who was refused a severance allowance on the ground that he was entitled to draw old-age pension
. In Denmark, workers who have been employed in the same undertaking for at least 12 years are entitled to a severance allowance except if, on termination of the employment relationship, they may draw old-age pension
These tendencies inevitably affected the old-age pension
Indeed, the maximum real value of the old-age pension
(paid to men and women from the ages of 60 and 65 respectively, subject to a means test), disability and care dependency grants (paid to the disabled and caregivers to disabled children), and the foster care grant (paid to court-recognised foster parents) declined until mid-2003, and then rose to approximately the real value in 1994.
As discussed in Chapter 2, the reform has a number of facets; (1) it improves financial sustainability and reduces risks by increased pre-funding and relating pension generosity to future changes in life expectancy; it introduces greater flexibility and fairness, by a closer link of pension benefits to lifetime earnings rather than earnings in the final years of a career; it improves financial incentives to postpone the retirement age through taking an old-age pension
; and it further restricts some alternative early retirement pathways.
Within this framework, we examine the effects of a pay-as-you-go old-age pension
on longevity and capital accumulation under two polar assumptions concerning the existence and absence of a fair intragenerational annuity market.
And, since it allows individuals to accrue old-age pension
rights while receiving AFP benefits, it reduces the tax base while keeping old-age pension
The demographic reality is that there will be only about two workers to support each old-age pension
recipient by the year 2020, vs.
However, this chapter shows that incentives embedded in public old-age pension
systems and other income support systems have encouraged early retirement, and that recent reforms have been insufficient to remove the bias against work at older ages.(1)