The Process of Retirement in Denmark: Trends, Public Discussion and Institutional Framework

Acting in conformity with an implicit contract between the generations — as does a pay-as-you-go financed pension arrangement — depends on the credibility and the long-run political viability of the scheme in question. Thus, the implied taxation must be politically feasible. Future scheduled taxes should be within the limits of practical acceptability to the social security tax-paying population. Because the social security system is basically an unfunded pension programme its financial integrity would be endangered unless it commands strong taxpayer support. Excessively high social security taxes — levied in one form or another — could conceivably jeopardize the whole system. The social security system, must be constructed in such a way that it can function with whatever age-structure of the population which may emerge or can seriously be expected to emerge, and also so that it retains its capacity to function over the longer run. New legislative regulations have to be considered from this perspective.