Pensions in Denmark

Pensions in Denmark are both private and public.

In Denmark, the public pension consists of two tiers. The first tier provides a universal income to people over the age of 65. This pension is paid to anyone that meets its qualifications, regardless of a retiree’s contributions. As of 2015, the maximum amount a person could receive was DKK 70,896( USD $10,081). However, it is means tested, so it can be adjusted for higher income individuals. Normally, the pension is reduced by 30 percent of any income that exceeds DKK 301200. To receive this pension, recipients must have had lived in Denmark for 40 years while they were between the ages between 15 and 65. If a resident has spent less the 40 years in Denmark, then he or she can still receive the pension, just at a proportionately reduced rate. Funding for this pension isn’t base on contributions, rather funds are secured from general tax revenue collected by the state.

The second tier is the Arbejdsmarkedets Tillaegspension, or ATP. This pension’s payout is determined by the contributions a person makes to it. The more years a person works, and the longer retirement is delayed, the more money a retiree will receive. Contributions to ATP are mandatory for employees aged 16 to 65 that work more than 9 hours a week. Employers are also required to make payments. The required contributions are set by a fixed sum. As of 2014, for a full-time employee, the required payment was DKK 3240 a year. An employer is responsible for two-thirds of the payment while the employee makes the other third. If a person is less than a full-time employee, the contribution is reduced accordingly. Like the universal pension, the retirement age is 65. However, starting 2024, it will be increase by six months every year until it reaches 67.

Occupational Pensions are another type of pension. Nearly 90 percent of the Danish workforce is covered by one. These schemes are mandated by collection bargaining agreements made between employers and employees, usually at the sectoral level. Company wide plans do exist, but they are not as common as sector wide pensions. Payouts made by these types of schemes are also determined by the contributions made by employees and employers. Typically, employee contributions range from 9 to 17 percent of their salary, the average amount is 11 percent. Generally, high wage earners contribute a higher percentage of their income to their pension than low wager earners.

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Wikipedia