Danish government proposes funding parental reduced work hours through pension savings

The Danish Social Democrats have proposed financing a scheme allowing parents to reduce working hours while their children are young by increasing contributions to a state pension savings plan, DR reports.

Finance Minister Nicolai Wammen presented the plan on Saturday in Copenhagen, stating it would “bring forward revenue that would otherwise come much later, so we can use it for the future of younger generations.”

The proposal, called “Børnetid” (Child Time), would enable parents of young children to work part-time while receiving financial support equivalent to parental leave benefits. The scheme assumes parents normally work full-time and will return to full-time employment afterward.

To fund the initiative, the government plans to expand the existing aldersopsparing (age-related pension savings) system, where contributions are taxed annually at 15.3%. Currently, the mandatory minimum contribution is 9,900 DKK per year, rising to 64,200 DKK seven years before retirement age.

Wammen said the increased contributions would generate higher annual tax revenue, which would directly finance the parental leave scheme. He added that the change would also encourage more people to save for retirement through taxed contributions rather than tax-deferred pension plans.

“We’ll get people to save more for their pension, so we take the tax when they contribute rather than when they withdraw. That way, this can be financed one-to-one,” Wammen said.

Employment Minister Ane Halsboe-Jørgensen emphasized that the scheme assumes parents have full-time contracts, with the state covering costs during the reduced-hours period.