Finance employers propose making pension contributions optional for under-35s

In September 2003, the employers’ association in Denmark's financial sector, FA, called for an end to compulsory employees' occupational pension contributions for workers under 35 years of age. Occupational pension contributions are regulated by the finance sector's collective agreement, which is to be renegotiated in early 2005. Trade unions and other large employers’ associations are not enthusiastic over FA's proposal.

On 29 September 2004, the main employers' organisation in finance, the Danish Employers’ Association for the Financial Sector (Finansektorens Arbejdsgiverforening, FA) announced to the media its proposals for the industry's forthcoming collective bargaining round in early 2005 (to replace a two-year agreement concluded in 2003 - DK0302102F). FA argues that younger workers should be given a choice as whether or not to pay the employee's contribution to their supplementary ('labour market') pension scheme, which is regulated by collective agreements. Employees under the age of 35 have enough expenses at this time of their life and their pension contribution can wait, FA argues. This proposal is controversial in that it breaks with the principle behind Denmark's collectively agreed labour market pensions, according to which the employer and employee must each set aside a fixed percentage of the wage for an occupational pension (TN0404101S). Generally, the employers’ share is two-thirds and the employees' one-third.

According to FA, the background to its proposal is a wish to introduce more flexibility and free choice in collective labour market pensions. Employee free choice in other areas is already a significant element of collective agreements in the financial sector. According to the 2003-5 agreement, the employer contributes 10% of gross pay to the occupational pension scheme while the employee contributes 5%. FA believes that this 5% employee contribution should be voluntary in the early years of employment, when expenses connected to establishing a family might have priority. In such cases, up until the age of 35, it should be possible for the individual employee to exchange his or her occupational pension contribution for pay. FA does not believe that there would be serious consequences in a long-term perspective. However, some calculations suggest that such a move might have an effect on later pension yields.

FA's counterpart in the forthcoming bargaining round, the Financial Services’ Union (Finansforbundet, FF), is not enthusiastic about the employers' idea. On the contrary, union members have been calling for improved occupational pension provision prior to the negotiations. So far, FF has not presented demands to the employers and it remains be seen if FA's proposal will change attitudes among employees. The president of FF, Allan Bang, personally thinks that the finance sector collective agreement's 'free choice model' should not include pensions.

If the parties agree in 2005 about giving younger employees' free choice over making pension contributions, it would be a historic breach with the principles behind collective labour market pensions. Other major employers' associations are more reluctant about the idea. The Confederation of Danish Industries (Dansk Industri, DI) has made no comment and the employers’ association in retail, Danish Commerce & Service (Dansk Handel & Service, DHS), is reserved. DHS believes that special conditions are attached to pensions, that flexibility has its limits in this case, and that young people are inclined to underestimate the need for savings.

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