Planning an early retirement? You’re out of luck if you live in Denmark.

The Nordic country recently raised the state pension age to 70, a change that will kick in by 2040. The new legislation means that Danes are on track to become the oldest workers in Europe.

It is just the latest in a series of increases after the Scandinavian country linked its retirement age to life expectancy in 2006 and legislated that it should be reviewed every five years.

The welfare agreement of 2006 attempted to protect the country’s finances and set pensions spending on a sustainable path. Without action, there were concerns that the cost of the state pension could spiral out of control as Danes lived longer but paid the same amount of lifetime taxes.

It could be a glimpse into Britain’s future. Here, the state pension age is currently 66 and scheduled to gradually rise to 68 by 2046.

But calls are growing louder for the retirement aged to be raised further and faster. Without action, the cost of the expensive triple lock on pensions will balloon and force either higher taxes or cut backs elsewhere.

“I don’t think we can really afford to [wait to the 2040s], to be frank,” Nigel Farage, the Reform UK leader, told The Telegraph last week. “If there is a sudden economic miracle, then it might change that. But it does not look to be happening any time soon.”

Liz Kendall, the Work and Pensions Secretary, announced a review into the state pension age last week in an effort to address the problem.

“There’s kind of cross party consensus that ... we need to increase the state pension age to deal with the rising cost of the state pension system,” says Heidi Karjalainen, an economist at the Institute for Fiscal Studies.

Such changes are controversial. In 2023, Jeremy Hunt, the then chancellor, shelved plans to lift the state pension age after a slump in life expectancy left ministers struggling to justify the change. In France, attempts to raise the retirement age have bought people out onto the streets in the thousands.

Raising the retirement age to 70 has not led to fiery demonstrations on the streets of Copenhagen, however. The increase “hasn’t come as a surprise to anyone” given the 2006 legislation, says Damoun Ashournia, the chief economist at the Danish Trade Union Confederation.

Denmark is one of nine OECD countries that currently links the retirement age to average life expectancy, effectively maintaining a fiscal brake on pension spending. The Nordic nation legislates that an average of 14.5 years should be spent in retirement. For every year increase in life expectancy in Denmark, the retirement age also rises by one year.

Wouter De Tavernier, a pensions economist at the OECD, says the link prevents governments having to rerun difficult political debates every five or 10 years and helps countries maintain financial stability with their pensions system.

“It avoids having to restart the same discussions over and over again, and therefore making long term financial sustainability dependent on political decisions and political calculations about what might or might not be popular in the elections.”

Yet even in Demark, there are limits.

“When we ask workers, the vast majority, 75pc, are against this increase,” says Ashournia. “They worry that they won’t be able to work until the retirement age, when we increase it by such an amount.”

Karjalainen says asking people to retire at 70 is as much a psychological challenge as it is an actual problem. It is a new decade and one that feels far older to most people.

“I think the higher the state pension age goes, just kind of psychologically, people think of someone aged 65 and someone aged 70 as kind of very different types of people,” she says.

However, it is not just about what voters will bear. There are physiological differences between 65 and 70. For instance, in the UK the rate of dementia stands at 1.7pc for those aged 65 to 69 years old but climbs to 3pc for 70 to 74-year-olds.

“We can’t just keep increasing the retirement age forever, because it becomes unrealistic for workers to work for so long,” says Ashournia.

The Danish Trade Union Confederation now wants the 2006 agreement to be softened, with the retirement age only rising by nine or 10 months for every year the life expectancy increases.

Mette Frederiksen, Denmark’s prime minister, has conceded that the policy may be at its limit.

“We no longer believe that the retirement age should be increased automatically,” she said in August last year. “You can’t just keep saying that people have to work a year longer.”

In the UK, the bigger concern in policy circles is whether the Government can afford not to make people retire at 70.

Spending on the state pension is only forecast to grow as a result of the costly triple lock, which guarantees annual increases by the highest of either average earnings growth, inflation or 2.5pc, whichever is highest.

The UK is estimated to have spent 4.9pc of its GDP on the state pension for the 2024/25 financial year. On the current trajectory, the cost is forecast to reach 6.3pc of GDP by 2054/55.

A 2023 independent report into the state pension age carried out by Baroness Rolfe recommended that the government should cap pension spending at 6pc of GDP to prevent overspending. It recommended raising the state pension age to 69 to ensure financial sustainability.

However, a later retirement age raises questions about fairness. While the average life expectancy in the UK stands at 78.8 years for men and 82.8 years for women, there is significant variation across the country. Men in Blackpool and Glasgow city have some of the lowest rates of life expectancy in the UK, at 73.1 years and 73.6 years respectively.

Any move to bring the state pension age in line with Denmark is likely to be met with significant pushback in the UK. Yet De Tavernier believes retirement at 70 will eventually reach Britain if life expectancy continues to rise.

“I think the discussion is more about in which time frame this will happen, and how do you get there? Do you get there by politics deciding on a time frame? Do you get there by linking a retirement age to life expectancy?” he says.

The nation’s pensions are heading towards a “big fiscal challenge” that needs to be addressed, says David Sinclair, the chief executive of the International Longevity Centre.

“The fact that our politicians are too scared to talk about what retirement is like, and how we might need to be supporting work longer, and how we might need to be healthier, just feels like an utter failure of our entire political classes.”

Ashournia says “the vast majority” of Danish Trade Union Confederation members “want to be working until the retirement age [and] even longer, if possible.”

“But today, two thirds retire prior to the retirement age because they cannot continue, or they choose to retire because they have saved sufficient funds. So the challenge for us is: how do we ensure that workers are able to continue to work until the retirement age – that’s under the current retirement age, which is 67 today.

“When we increase the retirement age in the future, this problem is just going to be become bigger.”

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