Plan for retirement

What? How much? When? How long? Many questions arise when you plan for retirement. Above all, it is about creating an overview of what your financial situation will look like when you retire. First step is logging into My PFA.

Log into My PFA

Use My PFA to plan your retirement

 

At My PFA, you find the Pension Plan, which is a tool that helps you plan your payouts. Here, you can:

  1. Get the full overview of your savings – pension savings, bank savings and home equity.
  2. Play with your own figures and draw up a plan that, to the extent possible, matches the expectations you have for your retirement.
  3. Initiate your plan.
  4.  

Sources of income in retirement

 

Which money to spend first?

 

It's all about optimisation

It is important to consider the order in which you spend your retirement funds in order to get the most out of your total savings. The optimum order depends on your needs, the return potential of your funds, tax matters and public benefits. On top of this, you also need to bring your partner’s financial situation into the equation. Below is an example of a spending order:

  1. Early retirement pension (provided that you have saved for early retirement and that you stop working before reaching the public retirement age)
  2. Public retirement pension, ATP and any early retirement premium and tax credit
  3. Available funds
  4. Pension funds (incl. any LD)
  5. Frozen property tax
  6. Home equity loan
Book a consultation to ensure the optimum spending order

You can use the above as a rule of thumb, but individual conditions may imply that the spending order should look different. Therefore, it is a good idea to consult a pension adviser regularly in order to ensure that your plan is continuously optimised to match your life.

 

 

 

 

Spending your retirement savings

First, lifelong pensions
You should break into your lifelong pension as soon as possible. Lifelong pensions are a good way to ensure that you can make ends meet for as long as you live. Together with public retirement pension, lifelong pensions provide a financial foundation that allows you to spend other pension savings and available funds without the fear of running out of money.

Home Equity
If home equity forms part of your pension savings, you should consider setting up an offset mortgage account while you can – meaning while you are still working. It may also be worth considering refinancing your mortgage.

Available funds
Often, available funds carry a low rate of interest and the returns are heavily taxed. Therefore, these funds should be spent before any endowment pension and LD funds.

Flexible instalment pensions
You can postpone or prolong the payouts form your instalment pension. This way, you can optimise your savings so that you may still receive the public retirement pension supplement and, at the same time, reduce the amount subject to the highest tax rate and equalisation tax. For instance, if you prolong your 10-year instalment pension to 15 or 20 years, you may be able to completely avoid having to pay the highest tax rate as a retiree. If your income tax rate is below 40 % as a retiree, or if you do not need a large lump sum when you retire, it may be a good idea to change your endowment pension to a life pension or an instalment pension and thus spread the payouts over, for instance, 10 years or the rest of life. Please note that regular payouts are set off differently against public retirement pension, early retirement pension, etc. than lump sum benefits.

Endowment pension and old-age savings
Endowment pensions and old-age savings can be paid out all at once, or you can leave the money with PFA until you need it. This way, your savings will continue to generate returns. You can also choose to reinvest the money through PFA Bank and get a strong return potential along with flexible payout options. It is also possible to split the payout into smaller portions or convert the endowment pension to an instalment pension. This may be a good idea if you do not pay the highest tax rate and don't stand to lose the public retirement pension supplement. You can also use the money to pay down your mortgage – however, this may involve a risk if the terms for mortgage loans change and you are planning to turn property value into cash at some point in time. Some also choose to reinvest the money (after taxes) in a life pension.

When is your pension paid out?

When you can have your pension paid out depends on when your pension plan was established:

  • If your pension plan was established before 1 May 2007, you can have your pension paid out when you turn 60.
  • If your pension plan was established after 1 May 2007, you can, as a rule, have your pension paid out 5 years before the public retirement age applicable at that time.

 

 

 

See the public retirement age that applies to you:

Year of birth Early retirement age  Public retirement age  Early retirement period  Earliest Retirement age New strict deduction   Life expectancy indexing, number of times 
1953:1 60 65 5 60  No 
1953:2 60 65 60  No 
1954:1 60½ 65½ 60  No 
1954:2 61 66 60  No 
1955:1 61½ 66½ 5 60 No  0
1955:2 62 67 5 60  No 0
1956:1 62½ 67 60 Yes  0
1956:2 63 67 4 60 Yes 0
1957:1 63 67 4 60 Yes 0
1957:2 63 67 4 60 Yes 0
1958:1 63 67 4 60 Yes 0
1958:2 63 67 4 60 Yes 0
1959:1 63½ 67 60½ *) Yes 0
1959:2 64 67 3 61 *) Yes 0
1960:1 64 67 3 61½ *) Yes 0
1960:2-1962:2 64 67 3 62 *)  Yes 0
1963- 65 68 3 63 *) **)  Yes 1
*) If your pension plan was established before 1 May 2007, you can have your pension paid out when you turn 60.
**) The earliest retirement age is five years before the public retirement age.

 


How is your pension paid out?

There are three basic pension types (savings types). Different rules apply to each pension type regarding how the savings are paid out and what happens to the savings when you die. Each type has its pros and cons – also in relation to public benefits and early retirement pension. At My PFA, you can see which savings types your money is divided among.

 

 

 

Life pension (annuities)

Monthly payouts for as long as you live.

When you die, the money goes to PFA’s other customers. However, you can secure your dependants financially by taking out a spouse’s/cohabiting partner’s pension and/or by means of a guaranteed payout in the event of death.

Instalment pension

Monthly payouts for a fixed number of years.

The money will be paid out to your dependants when you die.

Old age savings/ endowment pension

Paid out as a lump sum or in portions.

The money will be paid out to your dependants when you die.

The various savings types

Pension type Instalment pension
Maximum annual payment DKK 52,400
Maximum annual deduction value Highest tax bracket 52.7 %
Type of payout Monthly, min 10 years
Taxation on payout Income tax – without labour market contribution
Can be changed to Life pension
Payouts begin, at the earliest Age 60/62/63
Payouts begin, at the latest Age 75/77/78           

Important details:

  • Once the payouts have started, the payout period can be extended annually with effect from 1 January the following year. This means that you need to arrange an extension of the payout period with the pension company or bank the year before you want it to take effect. The extension means that your monthly payouts are calculated anew based on the size of the savings at the time of the extension and the length of the new payout period.
  • An instalment pension must be fully paid out 20 years after your public retirement age at the latest.
  • If you outlive the payout period, you may not have enough money.
  • Your savings will be paid out to your dependants if you die before the payout period ends.
  • When the payouts can begin depends on when your plan was established. See above.
  • May be set off against early retirement pension and the pension supplement of public retirement pension.
Pension type Life pension
Maximum annual payment Unlimited
Maximum annual deduction value Highest tax bracket 52.7 %
Type of payout Monthly
Taxation on payout Income tax – without labour market contribution
Can be changed to -
Payouts begin, at the earliest Age 60/62/63           
Payouts begin, at the latest Unlimited

Important details:

  • Unlimited payments only apply to life pensions that are established through an employer. For privately established life pensions, an annual limit of DKK 52,400 applies.
  • Establishment of a life pension is not subject to any upper age limit.
  • If you die before retirement, the money will go to PFA’s other customers.
  • You can secure your dependants financially by taking out a spouse’s/cohabiting partner’s pension and/or by means of a guaranteed payout in the event of death.
  • May be set off against early retirement pension and the pension supplement of public retirement pension.
  • When the payouts can begin depends on when your plan was established. See above.
Pension type Old age savings
Maximum annual payment DKK 28,900
Maximum annual deduction value            None
Type of payout Lump sum
Taxation on payout None
Can be changed to -
Payouts begin, at the earliest Age 60/62/63           
Payouts begin, at the latest Age 75/77/78           

Important details:

  • Old age savings are paid out as a lump sum or in portions.
  • Old age savings are not as heavily taxed as available funds – you pay a pension yield tax of 15.3 %.
  • The money is paid out to your dependants when you die.
  • Old age savings are not set off against public retirement pension.
  • May be set off against early retirement pension.
  • When the payouts can begin depends on when your plan was established. See above.
Pension type Endowment pension
Maximum annual payment DKK 0
Maximum annual deduction value            None
Type of payout Lump sum
Taxation on payout Flat-rate tax: 40 %
Can be changed to Instalment pension and life pension
Payouts begin, at the earliest Age 60/62/63
Payouts begin, at the latest Unlimited

Important details:

  • You can no longer make payments to an endowment pension.
  • The money is paid out to your dependants when you die.
  • Endowment pension is not set off against public retirement pension.
  • May be set off against early retirement pension.
  • In PFA, endowment pensions are paid out as a lump sum or in portions.
  • When the payouts can begin depends on when your plan was established. See above.

Maximise the value of your money

PFA Bank is for you who already have a PFA pension plan. Because we already know you and your financial situation, we can give you detailed advice and a full overview of your retirement finances and your investments. In PFA Bank you will meet a familiar investment concept that you already know from your pension plan.


7 reasons to let PFA manage your wealth:
  • Access to some of the best investment experts within the industry
  • Optimum interaction between your pension savings and your other investments
  • Attractive investment options
  • Simple, flexible and recognisable investment solutions
  • Qualified advice based on your specific needs
  • Easy access to your figures and investments
  • No trading and transaction costs when purchasing/selling through PFA Invest.