- You save on taxes when you make an extra payment as your pension payments are tax deductible (does not apply to old age savings plans)
- An extra payment lets you reduce or completely avoid having to pay top-bracket tax
- The return on pension savings is subject to a lower tax rate than the return on other investments and your bank deposit
What is your situation?
I pay top-bracket tax
You can gain a tax advantage by making an extra pension payment. This applies if you pay top-bracket tax (DKK 498,900 after labour market contribution).
I have paid less than DKK 70,000 to my pension savings plan
You can gain a tax advantage by making an extra pension payment. This applies if you, in total, have paid less than DKK 70,000, including ATP, to your instalment or life pension during 2018.
I am 5 years or less away from the public retirement age
The last five years before you reach your retirement age, you can pay up to DKK 46,000 (will increase to DKK 51,000 through to 2023). Unlike for example instalment pension and life pension, the payout from an old age savings plan will not be set off against your public old-age pension. This may be an advantage if you pay bottom-bracket tax and thus do not benefit the same from the pension allowance as those who pay top-bracket tax.
The payout from an old-age savings plan is tax-free, and, therefore, you cannot get tax deduction for the payments. The payment is deducted from your taxable income, so please be aware that payments to an old age savings plan mean more money for your retirement but less money at your disposal right now.