Tax rules

Get your taxes in check

Different tax rules apply to the various types of pension savings as some are deductible and others are not. Getting an overview is important as taxation plays a big part in determining how you make the most of your payouts when you retire. Please also note that special rules apply, for instance, in connection with expatriate service.

Read more about the different tax rules

Tax rules for pension

Different tax rules apply to the various savings types:

Regular payouts

Pension plan with regular payouts, except for temporary life pension
Tax code 1) Tax code 1
Establishment of the pension plan   No limitation
Deductibility of payments2) Unlimited 3)
Return Subject to a 15.3 % pension yield tax
Payouts - when? On the agreed starting date after attaining the earliest retirement age 6)
Payout - how? For the rest of your life from the time of retirement
Tax on payouts 8) Subject to income tax as personal income
Tax on payouts to dependants

When paid out as a regular benefit to your spouse/divorced spouse, domestic partner and children/stepchildren/your domestic partner’s children/heirs of the body below the age of 24, the savings will be taxed as personal income.

When paid out as a regular benefit to others: 40 % flat-rate tax, income tax on capital gains and possibly estate tax.

When paid out as a lump sum: 40 % flat-rate tax and possibly estate tax.

1) A tax code is PFA’s generic term for the tax rules that apply to a pension plan. Learn more about tax codes.

2) Private payments are not tax deductible. Payments made through your employer will not be taxed. The payments are not included in the salary which your employer reports to the Danish tax authorities and should therefore not be deducted on your tax return.

3) For private plans, the deduction must be divided in shares of 1/10 per year over 10 years if the agreed payment period is shorter than 10 years and the total annual payments to a pension plan with regular payouts (tax code 1) exceed DKK 53,800 in 2021.

4) Effective from 1 January 2013.

5) The taxation applies to pension benefits paid out to the insured after the earliest possible retirement age, cf. 6).

6) If your pension plan was established before 1 May 2007, you can have it 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. If your pension plan was established after 1 January 2018, you cannot have it paid out until 3 years before the state retirement age.

 

Your endowment pension and old-age savings plan must be paid out at the latest 20 years after your earliest pension payout age. Your instalment pension must be paid out at the latest 30 years after your earliest pension payout age.

7) All payments made to temporary life pensions and instalment pensions are subject to a total annual maximum. The maximum amount covers both private payments and payments made through an employer to insurance companies as well as financial institutions. If, prior to 22 April 2009, you have made private single payments to an instalment pension or a life pension, and if you did not use the full tax deduction at the end of 2009, your tax deductibility continues in 2010 and onwards even if the deduction exceeds DKK 50,000 per year. However, these deductions are included in the calculation of your options with regard to making payments to a temporary life pension or an instalment pension, also through an employer.

8) Payouts to dependants from life pensions and temporary life pensions will only be made if the pension plan includes cover in the event of death.


Temporary life pension

Temporary life pension
Tax code 1) Tax code 9
Establishment of the pension plan  No limitation
Deductibility of payments2) Up to a total of DKK 58,500 7)
Return Subject to a 15.3 % pension yield tax
Payouts - when? On the agreed starting date after attaining the earliest retirement age 6)
Payouts - how? Regularly for a period of minimum 10 years
Tax on payouts 8)  Subject to income tax as personal income
Tax on payouts to dependants

When paid out as a regular benefit to your spouse/divorced spouse, domestic partner and children/stepchildren/your domestic partner’s children/heirs of the body below the age of 24, the savings will be taxed as personal income.

When paid out as a regular benefit to others: 40 % flat-rate tax, income tax on capital gains and possibly estate tax.

When paid out as a lump sum: 40 % flat-rate tax and possibly estate tax.

1) A tax code is PFA’s generic term for the tax rules that apply to a pension plan. Learn more about tax codes.

2) Private payments are not tax deductible. Payments made through your employer will not be taxed. The payments are not included in the salary which your employer reports to the Danish tax authorities and should therefore not be deducted on your tax return.

3) For private plans, the deduction must be divided in shares of 1/10 per year over 10 years if the agreed payment period is shorter than 10 years and the total annual payments to a pension plan with regular payouts (tax code 1) exceed DKK 53,800 in 2021.

4) Effective from 1 January 2013.

5) The taxation applies to pension benefits paid out to the insured after the earliest possible retirement age, cf. 6).

6) If your pension plan was established before 1 May 2007, you can have it 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. If your pension plan was established after 1 January 2018, you cannot have it paid out until 3 years before the state retirement age.

 

Your endowment pension and old-age savings plan must be paid out at the latest 20 years after your earliest pension payout age. Your instalment pension must be paid out at the latest 30 years after your earliest pension payout age.

7) All payments made to temporary life pensions and instalment pensions are subject to a total annual maximum. The maximum amount covers both private payments and payments made through an employer to insurance companies as well as financial institutions. If, prior to 22 April 2009, you have made private single payments to an instalment pension or a life pension, and if you did not use the full tax deduction at the end of 2009, your tax deductibility continues in 2010 and onwards even if the deduction exceeds DKK 50,000 per year. However, these deductions are included in the calculation of your options with regard to making payments to a temporary life pension or an instalment pension, also through an employer.

8) Payouts to dependants from life pensions and temporary life pensions will only be made if the pension plan includes cover in the event of death.


Instalment pension

Instalment pension
Tax code 1) Tax code 2
Establishment of the pension plan  Until 15 years after the earliest retirement age
Deductibility of payments2) Up to a total of DKK 58,500 7)
Return Subject to a 15.3 % pension yield tax
Payouts - when? On the agreed starting date after attaining the earliest retirement age and the following 15 years.
Latest payout: 30 years after the earliest possible retirement age 6)
Payouts - how? Regularly for a period of 10 to 30 years; however, no longer than 30 years after the earliest retirement age
Tax on payouts 8)  Subject to income tax as personal income
Tax on payouts to dependants

When paid out as a regular benefit to your spouse/divorced spouse, domestic partner and children/stepchildren/your domestic partner’s children/heirs of the body below the age of 24, the savings will be taxed as personal income.

When paid out as a regular benefit to others: 40 % flat-rate tax, income tax on capital gains and possibly estate tax.

When paid out as a lump sum: 40 % flat-rate tax and possibly estate tax.

1) A tax code is PFA’s generic term for the tax rules that apply to a pension plan. Learn more about tax codes.

2) Private payments are not tax deductible. Payments made through your employer will not be taxed. The payments are not included in the salary which your employer reports to the Danish tax authorities and should therefore not be deducted on your tax return.

3) For private plans, the deduction must be divided in shares of 1/10 per year over 10 years if the agreed payment period is shorter than 10 years and the total annual payments to a pension plan with regular payouts (tax code 1) exceed DKK 53,800 in 2021.

4) Effective from 1 January 2013.

5) The taxation applies to pension benefits paid out to the insured after the earliest possible retirement age, cf. 6).

6) If your pension plan was established before 1 May 2007, you can have it 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. If your pension plan was established after 1 January 2018, you cannot have it paid out until 3 years before the state retirement age.

 

Your endowment pension and old-age savings plan must be paid out at the latest 20 years after your earliest pension payout age. Your instalment pension must be paid out at the latest 30 years after your earliest pension payout age.

7) All payments made to temporary life pensions and instalment pensions are subject to a total annual maximum. The maximum amount covers both private payments and payments made through an employer to insurance companies as well as financial institutions. If, prior to 22 April 2009, you have made private single payments to an instalment pension or a life pension, and if you did not use the full tax deduction at the end of 2009, your tax deductibility continues in 2010 and onwards even if the deduction exceeds DKK 50,000 per year. However, these deductions are included in the calculation of your options with regard to making payments to a temporary life pension or an instalment pension, also through an employer.

8) Payouts to dependants from life pensions and temporary life pensions will only be made if the pension plan includes cover in the event of death.


Endowment pension

Endowment pension
Tax code 1) Tax code 3
Establishment of the pension plan  It is no longer possible to establish an endowment pension 4)
Deductibility of payments 2) It is no longer possible to make payments to an endowment pension 4)
Return Subject to a 15.3 % pension yield tax
Payouts - when? On the agreed date after attaining the earliest retirement age and 15 years ahead 6)
Payouts - how? As a lump sum
Tax on payouts 8) The pension payout is subject to a 40.0 % flat-rate tax
Tax on payouts to dependants 40 % flat-rate tax and possibly estate tax
1) A tax code is PFA’s generic term for the tax rules that apply to a pension plan. Learn more about tax codes.

2) Private payments are not tax deductible. Payments made through your employer will not be taxed. The payments are not included in the salary which your employer reports to the Danish tax authorities and should therefore not be deducted on your tax return.

3) For private plans, the deduction must be divided in shares of 1/10 per year over 10 years if the agreed payment period is shorter than 10 years and the total annual payments to a pension plan with regular payouts (tax code 1) exceed DKK 53,800 in 2021.

4) Effective from 1 January 2013.

5) The taxation applies to pension benefits paid out to the insured after the earliest possible retirement age, cf. 6).

6) If your pension plan was established before 1 May 2007, you can have it 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. If your pension plan was established after 1 January 2018, you cannot have it paid out until 3 years before the state retirement age.

 

Your endowment pension and old-age savings plan must be paid out at the latest 20 years after your earliest pension payout age. Your instalment pension must be paid out at the latest 30 years after your earliest pension payout age.

7) All payments made to temporary life pensions and instalment pensions are subject to a total annual maximum. The maximum amount covers both private payments and payments made through an employer to insurance companies as well as financial institutions. If, prior to 22 April 2009, you have made private single payments to an instalment pension or a life pension, and if you did not use the full tax deduction at the end of 2009, your tax deductibility continues in 2010 and onwards even if the deduction exceeds DKK 50,000 per year. However, these deductions are included in the calculation of your options with regard to making payments to a temporary life pension or an instalment pension, also through an employer.

8) Payouts to dependants from life pensions and temporary life pensions will only be made if the pension plan includes cover in the event of death.


Old-age savings

Old-age savings
Tax code 1) Tax code 33
Establishment of the pension plan  Until 15 years after the earliest retirement age
Deductibility of payments 2) If you have more than 5 years until the state retirement age, you may pay up to DKK 5,400
If you have less than 5 years until the state retirement age, you may pay up to DKK 52,400
Return Subject to a 15.3 % pension yield tax
Payouts - when? On the agreed date after attaining the earliest retirement age 6)
Payouts - how? As a lump sum
Tax on payouts 8) Tax-free payouts when you reach your retirement age
Tax on payouts to dependants Tax-free; however, the plan may be subject to estate tax
1) A tax code is PFA’s generic term for the tax rules that apply to a pension plan. Learn more about tax codes. 

2) Private payments are not tax deductible. Payments made through your employer will not be taxed. The payments are not included in the salary which your employer reports to the Danish tax authorities and should therefore not be deducted on your tax return.

3) For private plans, the deduction must be divided in shares of 1/10 per year over 10 years if the agreed payment period is shorter than 10 years and the total annual payments to a pension plan with regular payouts (tax code 1) exceed DKK 53,800 in 2021.

4) Effective from 1 January 2013.

5) The taxation applies to pension benefits paid out to the insured after the earliest possible retirement age, cf. 6).

6) If your pension plan was established before 1 May 2007, you can have it 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. If your pension plan was established after 1 January 2018, you cannot have it paid out until 3 years before the state retirement age.

 

Your endowment pension and old-age savings plan must be paid out at the latest 20 years after your earliest pension payout age. Your instalment pension must be paid out at the latest 30 years after your earliest pension payout age.

7) All payments made to temporary life pensions and instalment pensions are subject to a total annual maximum. The maximum amount covers both private payments and payments made through an employer to insurance companies as well as financial institutions. If, prior to 22 April 2009, you have made private single payments to an instalment pension or a life pension, and if you did not use the full tax deduction at the end of 2009, your tax deductibility continues in 2010 and onwards even if the deduction exceeds DKK 50,000 per year. However, these deductions are included in the calculation of your options with regard to making payments to a temporary life pension or an instalment pension, also through an employer.

8) Payouts to dependants from life pensions and temporary life pensions will only be made if the pension plan includes cover in the event of death.
       


Tax rules for pension yield tax

As an individual pension customer, you are liable to pay tax on any return generated by your pension savings. It is the companies’ responsibility to calculate and settle the tax, and therefore you do not need to take any action if you are liable to pay tax on normal conditions in Denmark.

The tax will be deducted from your savings
At present, the tax rate is 15.3 % (2021) on the return on your savings. The tax will be deducted from your savings and, if you have CustomerCapital, 15.3 % will also be deducted from the interest on your CustomerCapital.

PFA Pension annually determines your pension yield tax and pays the amount to SKAT (the Danish tax authorities). You can see the size of the paid taxes at mitpfa.dk under ”Savings”.

Specifics applying to customers living abroad
If you are not fully liable to pay tax in Denmark or are a resident of a foreign country according to a double taxation agreement, you can apply for exemption from individual pension yield tax by contacting SKAT (the Danish tax authorities).

You find the application form here (skat.dk)

Please complete the form and forward it to:
SKAT
Sagscenter Person 11
Brovejen 15 A
4930 Maribo
Denmark
PFA’s CVR number (SE number) is 13 59 43 76

Once you have submitted the form, you will receive an exemption declaration from SKAT that you must forward to PFA:
PFA Pension
Sundkrogsgade 4
2100 Copenhagen
Denmark


Tax rules applying in connection with expatriate service

If your employer stations you abroad, you will generally not have to pay Danish tax on your salary, and therefore you will no longer get tax relief on your pension payments in Denmark.

This means that instead of continuing the payments to your present pension plan, you need to make the payments to a new pension plan without Danish tax deductibility for the payments.

A pension plan without tax deduction is exempted from Danish pension yield tax, and, as a rule, the payouts will not be subject to Danish taxes. Any return generated by the plan will be reported as capital income to the SKAT, but you are only liable to pay Danish tax on the return if you are fully liable to pay tax in Denmark. If you are no longer fully liable to pay tax in Denmark, you can apply for exemption from pension yield tax on your present pension plan by contacting SKAT (the Danish tax authorities).

In order for you to change which pension plan your payments go to, your employer must use a special code when reporting your payments to us. This must be done as soon as your expatriate services begins and immediately after your return to Denmark. If you employer takes too long to inform us, the change will not take effect until the first day of the month following the date when we receive the information.

Returning to Denmark
Generally when you return to Denmark, the payments to your pension plan without tax deduction will cease, and the tax-deductible payments to your regular PFA pension plan will be resumed.

Any current return on the plan without tax deduction will be subject to capital gains tax if you are fully liable to pay tax in Denmark. Pension yield tax is still not payable.

However, if during expatriate service, your payments were tax-deductible in your country of residence, the payouts will be subject to Danish tax if you are fully liable to pay tax in Denmark at the time of payout.

Seek advice
If you are being stationed abroad, PFA recommends that you contact the Advisory Services Centre or book a personal pension consultation both before you leave and when you return home. It may also be a good idea to consult an accountant, who can advise you about your overall financial situation.


Tax codes

One or more tax codes apply to each pension product. The tax codes describe the nature of the pension plan and the rules of deduction for payments and of tax on payouts. Below follows an overview of the various tax codes PFA uses.

Tax code 1: Pension plan with regular payouts, except for temporary life pension
Tax code 9: Temporary life pension
Tax code 2: Instalment pension
Tax code 3: Endowment pension
Tax code 4: Index-linked plan
Tax code 5: Insurance without tax deductibility
Tax code 6: Life insurance without tax deductibility according to the rules of taxable payments or contributions
Tax code 7: Pension plan without tax deductibility according to Section 53A of the Danish Pension Taxation Act
Tax code 33: Old age-savings