Retirement Age and Samverk

Retirement Age and Samverk

The Ministry of Social Affairs and Culture has submitted a Proposal for an Act to Amend the Act
on Public Pensions, etc. (Determination of Retirement Age) for consultation.
In this context, Samverk would like to point out that we advise against raising the retirement age
above 68 years, at least for employees in fields represented by Samverk. This recommendation
is based on their long careers in the labor market, where most transition directly from school to
the workforce.

In the comments on the proposed amendments, it is stated that “the Faroese economy is not
sustainable, and the challenge is that there is no balance between public revenues and
expenditures in the future. Significant interventions are necessary to improve the lack of
sustainability, and one of these interventions is to raise the retirement age. The aim of the
proposal is to improve the sustainability of the Faroese economy.” It is also assumed that the
increased lifespan will be spent with additional years in the labor market. Naturally, some
individuals are capable of and willing to work longer once they reach retirement age. However,
not everyone is able to do so.

Our recommendation is, therefore, that the statutory retirement age should not be raised above
68 years.

Instead, the political authorities should explore other options.

Our members have contributed to pension schemes for over 20 years. In 2012, it was legislated
that all Faroese residents must contribute to pensions. By 2026, the minimum contribution will
be 12%. Most union members have already been contributing 15% for several years. In
addition, all employees contribute 3% to the AMEG-Solidarity Fund, and employers contribute
3%for each DKK paid in wages to the Solidarity Fund. This provides a significant supplement to
the overall pension scheme.

By 2046, all Faroese residents will have contributed at least 12% to private pensions for 20
years.

Samverk instead recommends that, by 2046, people rely solely on their private pension savings
and the Solidarity Fund for their retirement income.

The contributions to the Solidarity Fund can be increased after 2026, once the legislated private
pension contribution reaches 12%. At that point, the contributions to the Solidarity Fund could
increase by 0.25% per year for both employees and employers, so that the total contribution
reaches 8% by 2030.

Individuals who reach retirement age after January 1st 2046, will no longer receive a public
pension. Instead, they will receive a higher payout from the Solidarity Fund, which will replace
the public pension and be financed by the increased contributions to the Solidarity Fund.
For those who retire before January 1st 2046, payouts from the Solidarity Fund will be
calculated based on a contribution of 6%. For those retiring after January 1st 2046, payouts
from the Solidarity Fund will be calculated based on a total contribution of 8% from 2030.

Sincerely,
Pætur Niclasen
Samverk