Savings Types

You can save for retirement in several ways, and you need to consider both tax matters and how you want to receive payouts when you retire.

Get the full overview at My PFA

Make the most of your pension payments

When deciding on a savings type, you need to consider both tax matters and how you want to receive payouts when you retire.

We recommend that you pay the first DKK 53,500 of your annual payments to an instalment pension and the rest to a life pension. This way, you pay minimum taxes. In addition, an old age savings plan is a good supplement to your company pension plan.

Please note that the savings types you can choose from may have been fixed in the agreement between PFA and your employer, which may limit your options.

See the pros and cons of the different savings types and the applicable rules in the table below. The amounts and rates apply for 2017.

Overview of savings types

Savings type  Life pension Instalment pension Endowment pension Old age savings
Payout Monthly payouts for as long as you live Monthly payouts for 10 to 25 years Lump sum benefit. Can, however, be split into several payouts Lump sum benefit. Can, however, be split into several payouts
Maximum annual contribution Unlimited DKK 53.500  You can no longer make payments to an endowment pension DKK 29.600 
Maximum deductible value Highest tax bracket 52.7 % ***  Highest tax bracket 52.7 % ***  - Not deductible 
Type of payout Regular  Regular  Lump sum benefit  Lump sum benefit 
Taxation  Income tax  Income tax  40 % No tax 
Establishment or increase after age 62 Yes Yes No Yes
Can be changed to - Life pension  Instalment pension and life pension  -
Payouts start, at the earliest* Age 60/62/63 Age 60/62/63 Age 60/62/63 Age 60/62/63
Payouts start, at the latest No limit  Age 75/77/78** Age 75/77/78**  Age 75/77/78**
Who receives the money if you die before retirement? The savings are paid out to your dependants The savings are paid out to your dependants The savings are paid out to your dependants The savings are paid out to your dependants
Who receives the money if you die after retirement? The savings go to PFA's other customers  The savings are paid out to your dependants The savings are paid out to your dependants The savings are paid out to your dependants
Pros
  • Money all through your life – no matter how old you get
  • Unlimited contributions
  • Tax deductions in the highest tax bracket 
  • Protected against creditors until the time of payout.
  • Money for a long period of time 
  • Tax deduction in the highest tax bracket
  • Protected against creditors until the time of payout
  • Large lump sum benefit
  • You can change to regular payouts
  • A fixed 40 % flat-rate tax instead of income tax 
  • Is not set off against the pension supplement of the Danish public old-age pension 
  • Does not have an impact on the equalisation tax
  • Large lump sum benefit
  • Is not set off against the the pension supplement of the Danish public old-age pension 
  • Does not have an impact on the equalisation tax

Cons

  •  You cannot have all the money paid out as a lump sum 
  • You cannot change the type of payout 
  • If you wish to cancel the pension before the agreed date, you must pay a flat-rate tax of 60 %
  • May be set off against the Danish public early retirement pension and the pension supplement of the Danish public old-age pension
  • You cannot have all the money paid out as a lump sum
  • You are likely to outlive the payouts 
  • Payments to the plan cannot exceed DKK 52,400 a year
  • If you wish to cancel the pension before the agreed date, you must pay a flat-rate tax of 60 % 
  • May be set off against the Danish public early retirement pension and the pension supplement of the Danish public old-age pension 
  • Your savings may be spent too soon
  • You can no longer make payments to an endowment pension 
  • Your savings may be spent too soon
  • It results in a deduction of minimum 4 % if your payments exceed the annual maximum
  • If you convert a tax-deductible pension plan into a plan without tax deductibility, you need to change your preliminary income assessment. Otherwise, you will have to pay back taxes the following year

* If your pension plan was established before 1 May 2007, you can have your pension plan paid out when you turn 60 at the earliest. If your pension plan was established after 1 May 2007 and you were born before 1 January 1963, you can have your pension plan paid out when you turn 62 at the earliest. Otherwise, you payouts will start when you turn 63 at the earliest.

** If your pension plan was established before 1 May 2007, you can have your pension plan paid out when you turn 75 at the latest. If it was established after 1 May 2007 and you were born before 1 January 1963, you can have your pension plan paid out when you turn 77 at the latest. Otherwise, you payouts will start when you turn 78 at the latest.

*** The tax value is calculated for an average local authority with a total local municipal tax percentage that in 2016 amounts to 25.6 % including church tax. The church tax amounts to 0.7 %.