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Retirement in Denmark: The pensions system explained

Denmark has various different types of pension, including an obligatory state pension and private options.

If you plan to spend most of your working life in Denmark, it pays to plan your pension form an early stage.
If you plan to spend most of your working life in Denmark, it pays to plan your pension form an early stage. Photo by Katarzyna Grabowska on Unsplash

If you work for a company in Denmark, you may already be on a private plan provided by your employer. You could also be paying directly into a labour market pension – contributions for this are shown on your payslip.

Meanwhile, the Danish state provides a pension to its residents, which is not related to employment.

The Danish pension system is based around three main types. By logging into Pensionsinfo using your secure login (NemId at the time of writing, soon to be replaced by MitID), you can easily check the status of all you pensions.

State sponsored pension (folkepension)

The folkepension is state-provided and not related to your employment. 

To qualify for the basic state-sponsored folkepension, you must have a permanent address in Denmark, have live in Denmark for at least three years between your 15th birthday and retirement age, and be a Danish citizen.

If you are not a Danish citizen, however, you still qualify for this pension if you have lived in Denmark for at least 10 years between the age of 15 and retirement age. Citizens of EU and EEA countries and Switzerland, as well as the United Kingdom, qualify without Danish citizenship, as do some refugees.

If you have lived and worked abroad, you can still qualify for the Danish pension, but the amount you will receive is affected by factors including how many years you worked abroad and how many years you have lived in Denmark. If you are entitled to state pensions from other countries, the periods for which you qualify for the foreign pension will not be eligible for the Danish pension.

Because of a 2017 law change, the age at which you can retire and take out a folkepension depends on when you were born, with the retirement age scheduled to increase incrementally in coming years.

People born after 1966 will be able to retire when they are 69 years old, while those born before 1954 can retire aged 65.

You can see the relevant breakdown of retirement ages here.

Denmark also allows you to delay withdrawing your pension. This enables you to earn a venteprocent or ‘waiting percentage’, increasing the monthly payout when you do withdraw it. You apply for this via the borger.dk website.

The state pension consists of a basic element (grundbeløb), which everybody gets, and a supplement (pensionstillæg), which is adjusted according to whether you live alone or with a spouse or partner.

The state pension can also be adjusted downwards if income from the two other types of pension is higher.

ATP (Arbejdsmarkedets Tillægspension)

ATP pensions are a supplementary labour market pension scheme which nearly everyone in Denmark pays into. Deductions are automatically taken out of your paycheck – you can see them on your pay slips. 

You only pay a third of your ATP pension contribution while working – you employer pays the other two thirds.

You can read in detail (in Danish) about tariffs, deductions and other factors which determine the ATP pension payout here.

READ ALSO: EXPLAINED: How to understand your Danish payslip

Your ATP pension will be automatically paid into your current account or NemKonto when you reach retirement age. The amount you receive depends on how much you have paid in through the course of your working life, and also when you paid it – earlier deposits result in higher pension payouts.

You can check how much ATP pension you can expect to receive at any time by logging into to your account via borger.dk.

Private or individual pension

Anyone in Denmark can join a private pension scheme, and if your company offers a private pension programme, then you will also see line items on your pay slips for employer and employee contributions. 

There are a range of different companies and pension options which you can choose to pay into individually, and you should carefully consider which best suits you.

For those discussing private options with an employer, you and your advisor will consider personal and family situation and how comfortable you are with the various options before making a final decision.

If you think that you will leave Denmark before you retire, you should mention this to your pension advisor to discuss your options. You will generally be able to take the pension with you, but you will have to pay high taxes if you take the money before retirement age.

Source: borger.dk

READ ALSO: Feriepenge: Denmark’s vacation pay rules explained

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MONEY

Boligstøtte: Who can claim Denmark’s national rent subsidy?

Residents of Denmark can in some cases apply for ‘boligstøtte’ (“housing support”), a reduction on their monthly rent.

Boligstøtte: Who can claim Denmark's national rent subsidy?

What is boligstøtte? 

Boligstøtte is a tax-free sum which people who live in rented housing can – in some cases – qualify for. It provides a subsidy to rent.

The subsidy is available to anyone who rents their home, provided the home meets certain criteria and the household income is under a certain level.

For example, your rental home must have its own kitchen (which would rule out student housing with shared kitchens, termed kollegier in Danish) and you must live permanently in the property.

Homeowners can also be entitled to apply for boligstøtte under certain circumstances. In such cases, the boligstøtte is a loan and not a subsidy, however.

The size of the subsidy – the amount of money you receive each month – depends on the overall income of the household (the total of the incomes of all wage earners at the address), the number of children and adults who live at the address, the amount of rent and the size of the house or apartment.

Boligstøtte is paid out on the first working day of each month.

How do I know if I’m entitled to boligstøtte?

Most people can apply for boligstøtte if they live in rented housing. There are a few living situations that can disqualify you, such as if you live with the owner of the property (including as a tenant) or if you own the property yourself and rent part of it.

You can, however, apply for the subsidy if you live in a property owned by your parents and pay rent to them (known as a forældrekøb – “parent purchase” – in Danish).

You can also apply for boligstøtte if you are sub-letting your house or flat, although the person sub-letting to you might have to change their address in order to avoid their income being taken into account in your application.

People who own their homes can receive bolistøtte (as a subsidy, not as a loan as detailed above) if they receive the state pension folkepension, or disability pension, førtidspension.

How and where do I apply?

You can submit an application via the borger.dk website at this link. The application platform will ask you to submit a rental contract and other documentation for your claim to be processed.

If you’re applying after moving to a new address, you must have registered your change of address with the national personal registry prior to applying. This can be done here. If you apply within 30 days of moving, the subsidy will be effective from the date you moved in. Otherwise, it will count from the first day of the following month from when you submit your application.

The processing time for the application can be up to seven weeks. You’ll receive a confirmation of your application via your Digital Mail inbox, and you will also receive notification here once the application has been processed.

By how much can I reduce my rent?

This depends on the various factors on which your eligibility is calculated – for some, you will not qualify to receive any subsidy at all.

There are five criteria upon which your eligibility – and the amount you receive – is calculated. They are the income of the household; the savings or fortune of people in the household; number of children and adults living at the address; size of the home (in square metres) and amount of rent paid.

You will receive more money if you have more children. For example, people who live in rented homes and are not receiving the state pension can get up to 1,039 kroner per month if they have no children; up to 3,654 kroner per month if they have 1-3 children; and up to 4,568 kroner per month if they have 4 children or more.

The borger.dk website has a tool on which you can estimate your boligstøtte here.

Source: borger.dk

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