Pension in Denmark

In Denmark, you receive a state pension from the state itself, but a lot of people choose to deposit the money in a pension company. The pension system in Denmark is a universal one that covers the whole population, anyone who lives in Denmark, be it a foreigner, or a local can be entitled to receive a pension at retirement. This isn’t dependent on the contributions made to your pension scheme. In some cases, your employer will deposit money for your pension. This solely depends on the terms and conditions of employment and the company.

The Danish pension system can be quite complex for outsiders working in Denmark and may consist of a number of rules and regulations, but it can be a great help for you, not only in your career but later in life. It allows you to save up money for your family, your retirement and also secures you financially in the case of a critical illness.

There are several types of pension in Denmark and most of them are adjusted to your requirements and needs, you need to adjust your pension scheme continuously to fit your lifestyle. The pension age in the country is around 65 years but in the coming years, the pension age should increase to 67 and in 2022 to 67 years, and by 2030 to 68 years. This gradual increase in pension is due to the fact that most people have a high life expectancy and continue working way beyond their pension period.

The types of pension in Denmark

There are different types of pension in Denmark and a variety of schemes per the terms and conditions of employment, be it a private or public sector. This depends on how many years you are planning to live and work in Denmark. The types of pension schemes range from individual pension, labor market pension, occupational pension, state pension, and foreign pension.

As a general rule, the state and labor market pensions are mandatory whereas the individual pension schemes are more flexible and depend on where you work and your salary package.

State pension

The public pension system in Denmark consists of two types, the first is the universal pension type that is paid to people when they reach that particular age of pension. The amount is paid regardless of your contribution as long as you meet the required criteria. In order to receive this type of pension, you need to have lived in Denmark from the age of 15 to 65 and for a period of 40 years. If you have stayed for less than 40 years in the country, then your pension is proportionally reduced.

The second type of pension is the social disability pension. This kind of pension is provided to an individual based on their medical and their social factors. If you cannot work to your full capacity due to health or medical reasons, then you receive around 40% of the average income while also getting access to healthcare and housing benefits.

Occupational pension

This type of pension covers around 90% of the existing workforce in Denmark and is completely dependent on the collective bargaining agreement that the firm signs with its employees. The pension depends on the company and although it is sector-wise, many brands also have a particular company-wide scheme. The first is highly preferred and quite popular. In this pension, the firm and the employer contribute to the pension scheme and the employees also contribute from 9 – 17% of the salary depending on whether they are in a big or small company. This amounts to one-third, the remaining two-thirds are given by the employer.

Individual pension

Pension companies in the state have personal pension schemes. They are private saving schemes and you can participate in them if you want to. Here, the entire contribution to this scheme is done by the individual and they have an agreement between the pension company and them to determine how much they will have left in their account on attaining the age of pension. The pension can be taken as a phased withdrawal, a lump sum, or a life annuity – part of the pension is exempted from tax.

Labor market pension (ATP)

The ATP is the biggest pension scheme in Denmark and the payout depends solely on the contribution made by the person. If a person delays their retirement age and continues working, it goes without saying that the amount of pension they will receive at the time of retirement will be higher compared to a person who retires early. In Denmark, the law stipulates that a person working for more than nine hours a week and is 16 to 65 years can make payments to the pension plan. When they do this, the employer’s contribution is 2/3rd whereas that of the employee is 1/3rd.

Foreign pension

Pension for foreigners in Denmark is dependent on the number of years the individual has worked in the country. If you have worked for 40 years in the country then you will receive your full pension. If not then the pension will be proportionately reduced.

How to claim your pension in Denmark

Pension is not automatically paid in Denmark; you need to apply for it once you reach a certain age to receive the pension. It is common for individuals reaching the age to apply for pension six months in advance. You can apply on a number of websites for the pension and simply fill out the online form and submit it. You will be notified when your form is accepted and will receive the date you will get your pension.

If you are a foreigner and have worked and lived in the country for a minimum of three years between 15 and 65 you can apply for a pension when you reach retirement age.

The bottom line

The pension system in Denmark is the best in the world, and it periodically adjusts itself so that the person receives the right amount of pension for the years they have lived and worked in Denmark. This ensures that all pensioners get what they deserve.

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