Taxation of Pension Savings

Read about the different tax rules that apply depending on your type of savings plan.

Tax rules broken down by pension type


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 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, cohabiting partner and children/stepchildren/your cohabiting 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.

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 53,500 7)
Return 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, cohabiting partner and children/stepchildren/your cohabiting 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.

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 53,500 7)
Return 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: 25 years after the earliest possible retirement age 6)
Payouts - how? Regularly for a period of 10 to 25 years, however, no longer than until 25 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, cohabiting partner and children/stepchildren/your cohabiting 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.

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 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
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) Not tax deductible, and the annual payments cannot exceed DKK 29,600
Return 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) It applies to private plans that 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 48,200 in 2016.

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 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.

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.