We continue the series of explainers related to retirement in Denmark. Last time we covered the state pension. Now we move forward to labor market pensions and individual pensions.
Individual pensions are private financial products you can get from a pension fund or a bank. There are mainly three types: retirement savings (alderopsparing), installment pension (ratepension), and life annuity (livsvarig livrente).
- You can pay max. 9,100 DKK yearly to the retirement savings. It’s not tax deductible, but you don’t have to pay tax when you retire and withdraw the money. If you take the money out earlier, you pay a 20% tax. It is a lump sum you receive in one payment.
- You can pay max. 63,100 DKK yearly to the installment pension. It is tax deductible, but you also pay income tax when you receive it. You can receive the pension for minimum 10 years and maximum 30 years.
- You can pay as much as you want for the life annuity. It is tax deductible, but you will pay income tax when you receive it. You can receive the life annuity for as long as you live.
Labor market pensions are financial schemes you can get in connection with your work contract if you have a company pension agreement or a collective work contract. If you change jobs, you might need to also change your pension company. Those who do that often end up with many pension savings accounts. Usually, both the employer and the employee contribute to the labor market pension. Remember that you can take risks with this pension for bigger gains.
If you have a job without a labor market pension, you can at least count on ATP Lifelong Pension. The size of pension is directly related to the number of years worked in Denmark. This is a supplementary income to the state pension.
