Denmark well served with pensions

Plentiful pension schemes are helping Denmark’s working population feel secure.


  • More than 75% of Denmark’s working-age population aged between 15 and 64 have a paid job.
  • A number of employers offer private medical insurance and company cars.
  • Danish employers now face hefty fines for the incorrect or untimely reporting of wages, salaries and employee benefits to SKAT, the Danish tax administration.


More than 73% of Denmark’s working-age population, aged between 15 and 64, have a paid job, according to the Organisation for Economic Co-operation and Development’s (OECD) annual Better life index, putting it well above the OECD employment average of 66%.

That, coupled with high scores for other wellbeing factors measured by the OECD, could explain why Danes are known as the happiest people in the world. So what employee benefits are on offer to help fuel this contentment?

Membership of at least one of Denmark’s many pension schemes is almost universal. These include: a state pension scheme; other statutory schemes, such as the Danish labour market supplementary pension (ATP), the country’s largest pension fund; occupational schemes; and private personal schemes. All employees who work more than nine hours a week are required to contribute to the ATP scheme to supplement their state pension.

Those who are unemployed, on maternity leave or on state benefits can also join the scheme. ATP contributions are based on the number of hours an employee works and whether their employer is public or private. Employees pay one-third of the ATP contribution and their employer pays two-thirds.

Workers were also required to pay 1% of their gross income into Denmark’s special pension savings arrangement (SP) until the scheme was cancelled on 30 April 2010. Pension contributions are automatically deducted from employees’ monthly pay, and a pension is paid out when they reach 65 or 67 years old, depending on when they were born. The majority of employers invite staff to join an occupational pension scheme, into which employers typically contribute about 8% and employees around 4%, according to Anders Zitawi, tax manager at Deloitte.

Major pension providers

There are four or five major pension providers in Denmark, with PFA Pension being one of the largest, says Zitawi.

Some providers also offer insurance policies, including health insurance and disability, critical illness insurance and death-in-service cover. There are also several types of private personal pension schemes in operation in Denmark.

Zitawi says: “There is a capital pension scheme [which provides a one-off payment in retirement but is due to be abolished on 1 January 2013], a new age-savings scheme [due to be implemented on 1 January 2013], which provides a tax-free, one-off payment in retirement [though contributions are not tax deductible]; a pension payable in instalments, which pays out taxable instalments over 10 years [contributions up to DKK 50,000 (£5,400) a year are tax deductible]; and several types of lifelong pension insurance schemes, some with contributions fully tax deductible. Returns on pension savings are taxed continuously.”

As well as pension scheme membership, Danish staff are typically offered a basic level of health benefits. Zitawi adds: “Basic health benefits may include minor health checks, flu vaccination, alcohol addiction treatment and tobacco-cessation programmes. Group life insurances are typically in effect as a part of the occupational pension scheme.”

Bo Andresen, partner, director international division at Dahlberg Assurance Brokers, says more comprehensive health cover, in the form of private medical insurance (PMI), is available to all employees.

Taxation of employee benefi ts has come under scrutiny in recent years because of the level of incorrect reporting to SKAT, the Danish tax administration, according to KPMG’s update, Denmark: Tax treatment of shareholder loans, pensions, employee benefits. Heavy penalties can now be imposed on employers that fail to report wages, salaries and benefi ts to SKAT in a timely and accurate manner.