Pensions, often referred to as a financial safety net for the golden years of one’s life, represent a crucial pillar of retirement planning. These retirement funds, typically established by employers or individuals themselves, serve as a promise of financial security during the later stages of life when the hustle and bustle of a career has diminished. The notion of diligently saving and investing over the years to ensure a comfortable retirement should provide individuals with the peace of mind that their post-working life will be marked by financial stability and a well-deserved respite from the daily grind. Understanding the complexities of pensions, from their various types to the ever-evolving landscape of retirement planning, is essential to navigating the journey toward a prosperous retirement.
The pension system in Denmark
The Danish pension system can be divided into three different kinds of pensions: state pensions, labor market pensions, and individual pensions. You can get a pension from more than one source under the Danish pension system. When you reach the state retirement age, you will usually be able to get a state pension. If you are employed, the company will probably also put some of your paycheck into a pension savings account, and you can also set up your own pension plan.
State pension
The Danish government’s pension plan, called state pension or “folkepension” in Danish, is based on the idea of universalism and is meant to help all Danish citizens and residents financially when they get old. People must meet certain age and residency requirements in order to be qualified for the state pension. As of the most recent update in September 2021, the normal retirement age for getting the full state pension was 67 years old. However, people could choose to retire early or later, depending on their wishes. To be eligible, you must have lived in Denmark for a certain amount of time.
There is a set of rules for applying for a state pension:
- You need to have Danish, EU/EEA, Swiss, or British citizenship.
- Have a total of 3 years of earned entitlement pension from EU/EEA countries, Switzerland, or the United Kingdom, 1 year of which must be in Denmark.
- You need to have resided in Denmark for at least 10 years, from age 15 to retirement age.
People who meet these requirements can get a basic state pension, which is like a safety net.
You have to ask for your state pension; it won’t just come to you. If you are less than 6 months away from reaching the age for the state pension, you can file your claim.
Udbetaling Danmark
Every year, ”Udbetaling Danmark” makes sure that you get the right amount of state pension for the year by revising your pension. The yearly revision can have one of three outcomes:
- Last year, your income was correctly projected.
- Last year, your income was higher than projected.
- Last year, your income was lower than projected.
“Udbetaling Danmark” looks at your tax assessment notice from “Skattestyrelsen” (the Danish Tax and Customs Administration) and the information you give them about the income you and your partner or cohabitant make that is not taxed in Denmark.
If your tax notice shows that your total income was more than the amount that your income was based on, you have to pay taxes on the excess amount. If your total income was less than the amount that your pension was based on last year, you will get extra money from your pension. The income of your partner is also considered when calculating your pension.
What impacts your state pension?
Whether you live alone or with someone has an impact on your state pension. Usually, if you live alone, you will get a bigger pension. You have what is called the “duty to disclose information” if you are a pensioner. This means that you need to inform “Udbetaling Danmark” if your marital status changes from single to cohabiting or vice versa.
If you live alone, one set of rules applies. If you have shared an address with someone who is not a relative, you are cohabiting. According to Danish law, to be considered cohabiting, you must be eligible to get legally married in Denmark.
As an example, in 2023, the state pension will be 6694 DKK plus supplements, depending on whether you are living alone or cohabiting. If your pension is not able to cover your expenses, there are a few types of aid that you can apply for: health, personal, or heating supplements.
Pension from abroad
An “udenlandsk pension” is something you might be able to get if you have lived or worked in a country other than Denmark. There are different rules in each country that determine if you can receive your foreign pension in Denmark, considering that each country has its own rules. The appropriate authorities need to be contacted to retrieve the necessary documentation and determine the exact process. If you worked for a certain number of years in another country and then moved to Denmark, your pension funds can be transferred. Everything must be coordinated with “Udbetaling Denmark”, as the rules and documentation might differ a lot from one country to another.
