Rules on pension savings and retirement

According to the standard collective agreement, you are entitled to a pension scheme, into which at least 16.25% of your pensionable salary is paid. The pension scheme also guarantees you compensation in case of critical illness and death as well as access to treatment in a private hospital. Read about the rules on pension savings and retirement here.

Pension

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Am I under an obligation to contribute to a pension scheme?

The standard collective agreement requires the company to establish a collective pension scheme for the employees. Under the collective agreement, the company must contribute at least 16.25% of your pensionable salary (of which at least 11% is payable by the company), and consequently you may have to pay 5.25% of your pensionable salary yourself.

Local agreements may include requirements for higher contributions and other distributions of the contribution. The calculation basis for insurance agents may also be different.

How much must I pay myself?

If you are covered by the standard collective agreement, your share of the pension contribution is usually 5.25% of your pensionable salary.

If you are an insurance agent, your local pay agreement states whether and with how much you must contribute.

If you are covered by a corporate collective agreement, a minimum contribution higher than 16.25% and an employee contribution lower than 5.25% may have been agreed. Your share of the contribution will be deducted from your salary.

Can my employer’s pension contribution be paid out to me?

Employees who have either transferred to part-time employment for seniors or who have reached their pension payout age under the Pension Taxation Act have the option of choosing to have the employer's pension contribution paid out and not to pay their own contributions.

For employees who have transferred to part-time employment for seniors, the employer's contribution based on the former level of employment is paid out as salary.

If an employee wants to use this option, the employee must consult the pension company, which can give correct advice in relation to both pension and insurance issues.

This allows seniors who choose to work part-time to partly maintain their former salary.

Which scheme should I choose?

The pension scheme must include both savings and risk cover. The minimum requirement and the possibilities of individual options for risk cover are agreed locally between your management and your union representative, and the parties also agree on the options for placing savings.

Talk to your pension company about your options. You can always ask the company's management, typically HR, or your union representative if you need to know the pension agreement.

Can I opt out of the risk cover?

The earliest time that you can opt out of the risk cover attached to your pension savings is when you reach pension payout age. In most cases, the pension payout age begins five years before old-age pension age.

However, we recommend that you always consult a pension adviser before you opt out of the risk cover.

How am I covered by insurance?

Under the standard collective agreement, cover is provided in the following situations:

  • DKK 200,000 in case of critical illness
  • DKK 150,000 in case of death
  • Treatment at a private hospital (healthcare/health insurance)
  • Dental treatment (healthcare/health insurance)

Special rules apply to insurance agents.

Your employer and the union representative agree how your basic cover in the form of healthcare insurance, life assurance and loss of earning capacity is made up.

If you do not have your pension papers at hand, or if you have several pension schemes and types of insurance cover, you can find your information at PensionsInfo.dk. There, you can see your pension schemes from different pension providers and the public benefits such as old-age pension, ATP (the Danish Labour Market Supplementary Pension) and early retirement benefit.

Can I take out collective pension insurance?

As a member of Finansforbundet (Financial Services Union Denmark), you can now take out collective pension insurance with PFA Pension, where you can get collective insurance with, for instance, a lump-sum benefit in the event of critical illness and a lump-sum benefit in the event of death. We call the scheme Medlemsplus. This is particularly interesting for unemployed members and members employed outside the financial sector.

 

Individual options

An agreement with PFA Pension has standard insurance cover, which can be supplemented with individual options. The basic package includes PFA critical illness, a lump sum payment of DKK 125,000; PFA Occupational Capacity, regular disbursements of DKK 150,000; and PFA Life, a lump sum payment of DKK 300,000.

 

Minimum contribution to the pension scheme

To establish Medlemsplus with insurance policies, you must contribute a minimum of DKK 2,000 per month to your pension scheme, which amount is tax-deductible like other pension payments. If you choose to pay the minimum amount and risk cover corresponding to the basic package, the price for the risk cover will be DKK 553, and accordingly you will save DKK 1,447 for your pension.

 

This is how easy you get started

You can read more about your options at pfa.dk/medlemsplus or book online consultancy with PFA Pension on +45 39 17 60 19.

What is the correlation between pension and early retirement benefit?

The rules in this area are complicated and are regularly changed by the Danish Parliament. Consequently, your best bet is to contact your unemployment fund to get an answer to this question. If you are a member of FTFa, you can contact one of the unemployment-fund advisers in the secretariat of Finansforbundet. This will allow you to get an answer in precisely your situation.

I would like to retire – what do I do?

Contact your pension company and get advice about how you make the most of your pension funds. Then you can better decide when you want to stop working. You must give notice of resignation at least one month in advance of the effective date of resignation, which is always the last day of a month.

It is a good idea to tell your company that you stop work to retire. Many companies give their retired employees advantages, such as special terms for employees on interest and fees, events for retirees and rent of holiday homes.

My company wants me to retire – what do I do?

If your company wants you to retire, this must be agreed with you. Otherwise, they must dismiss you by giving you the notice you are entitled to under the Salaried Employees Act. The dismissal must be reasonably justified, age not being a valid argument. Age may also offer some protection as it is prohibited to discriminate because of age.

If you are dismissed, you should contact your shop steward, your union representative or Legal Affairs and Negotiations in Finansforbundet to get advice about your situation and your rights.

Tax on pension income

Finansforbundet does not advise about tax matters.

Read more about tax on pension income on SKAT's website

Can I stop paying pension contributions?

Employees who have either transferred to part-time employment for seniors or who have reached their pension payout age under the Pension Taxation Act have the option of choosing to have the employer's pension contribution paid out and not to pay their own contribution.

For employees who have transferred to part-time employment for seniors, the employer's contribution based on the former level of employment is paid out as salary.

If an employee wants to use this option, the employee must consult the pension company, which can give correct advice in relation to both pension and insurance issues.

This allows seniors who choose to work part-time to partly maintain their former salary.

Can my pension be paid out before I retire?

You have limited possibilities of having your pension paid out to you before you retire. The main criterion is whether you have reached pension payout age, which occurs five years before the old-age pension age.

In case of a pure endowment insurance, it can always be paid out when you reach pension payout age.

As regards capital pension or retirement savings, some of it may be paid out as a lump sum when you reach pension payout age. If you receive part of the capital pension while you are still working, the amount before tax may not exceed your gross salary as stated at the most recent 1 January. Where retirement savings are concerned, the amount may not exceed half of your gross annual salary as stated at the most recent 1 January.

As regards retirement pension in the form of periodic payments (e.g. annuity certain or life annuity), you must – as long as you are in employment – be old enough to receive old-age pension, before you can begin to receive the entire pension. If you work reduced hours and have reached pension payout age, you can choose to have a pro rata share of these pension schemes paid out, corresponding to the reduction of your working hours. This requires, however, that the contributions to your pension scheme have stopped. Read more about this under "Can I stop paying pension contributions?". Just to make sure: the payout can start although you choose to stay in the labour market.

If you do not satisfy these age requirements, you must apply for dispensation for payout, which is only granted in a few cases. Contact your shop steward or union branch if you want to know more about your possibilities.