Measuring the effects of the 1999 voluntary early retirement reform

The objective of the 1999 voluntary early retirement reform was to encourage people to remain on the labour market by making the voluntary early retirement scheme less attractive. This was based on the need to increase the supply of labour, so as to increase the number of working people to support the growing number of older people in the population.
The aim of the Danish National Centre for Social Research (SFI) has been to measure the impact of the voluntary early retirement reform on the supply of labour. A slight fall in the number of people who choose to retire early has been demonstrated due to the stricter rules concerning set-off against personal pension assets. Furthermore, it appears that the tax-free bonus for staying at work has also led to a small decrease in the transition to voluntary early retirement schemes.
In addition to this the report concludes that the reform has changed the pattern for when people choose to retire early. It has become more probable that the group who stand to lose the least will retire early, and less probable for those who stand to lose the most. In the long term, i.e. in the course of the next 20 years, it is likely that significantly less people will choose to retire early because salaries are expected to increase more than early retirement pay (due to the rates regulation). All in all, the voluntary early retirement scheme is less appealing today than before the reform. Among those who were given the possibility to opt out of the voluntary early retirement scheme after the reform was introduced, there has been a significant decrease in the number who choose to belong to a voluntary early retirement scheme.
This study was funded by the Danish Government’s Labour Market Commission.