Danish Pension Funds



Global Index – Second best pension schemes!


Photograph: iStock

Text: Mariano Anthony Davies


The Mercer CFA Institute Global Pension Index compares 39 retirement pension income systems, covering almost two thirds of the world’s population.


Formerly known as the Melbourne Mercer Global Pension Index, the Global Pension Index benchmarks retirement income systems worldwide, highlighting some shortcomings in each system and suggests possible areas of reform that would provide more adequate and sustainable retirement benefits.


The 2020 Mercer CFA Institute, Global Pension Index Report, awards national pension systems points for adequacy, integrity, and sustainability and gives them an overall score. The Netherlands came top last year with 82.6 points, followed by Denmark.


In Denmark, the average pension age is 65, but many people choose to continue to work longer. Therefore, you are automatically entitled to a State Pension. You will receive the full amount of the State Pension if you have lived in Denmark for at least 40 years and a fraction if you have lived in Denmark for less than 40 years.


Entitlement to pension is acquired based on residence in Denmark and is thus not conditional on payment of contributions. The public retirement age is currently 65 years but will be increased gradually to 67 years in the period 2019-22 and to 68 in 2030.


Besides the State Pension, all those who have paid tax in Denmark also receive The ATP Lifelong Pension - a statutory pension scheme to which most people contribute. Under it, your pension is automatically paid out when you reach retirement age. In addition, in the event of your death, your spouse, partner or children receive a lump sum from ATP.


Denmark also has an Early Retirement Pension (efterløn) option. This scheme allows you to withdraw from the labour market four years before you reach your retirement age. You must meet certain conditions to be entitled to an early retirement pension. The conditions that apply to you depend on when you were born.


To receive an early retirement pension when you reach early retirement age, you must be a member of an unemployment insurance fund, you must have paid early retirement contributions for 30 years, and you must have begun making the payments no later than your 30th birthday.


Danish Labour Market Pension Schemes are agreed upon between the labour market partners, through collective agreements for specific areas of work. An individual pension is a savings scheme that you set up with a bank or pension fund, independently of your employer.


Self-Employed Persons earn the right to retirement pension like everyone else, but they do not have a labour market supplementary pension and can choose whether to contribute to the ATP Lifelong Pension.


"The top five Danish pension funds are extremely robust due to a very successful investment policy with what has proven to be a successful balance between conservative and aggressive investing."

The top five Danish pension funds are extremely robust due to a very successful investment policy with what has proven to be a successful balance between conservative and aggressive investing.


Given the relatively small population (approx. 5.8 million people), these five funds reported the following total assets level by 2015:

  • ATP – DKK 691 Billion.

  • PFA Pension – DKK 552 Billion.

  • Danica Pension – DKK 366 Billion.

  • Sampension – DKK 257 Billion.

  • PKA – DKK 215 Billion.


Throughout a number of years, PensionDanmark (one of the 50 largest pension funds in Europe now with DKK 268 Billion under management) has been focusing on increasing the share of investments in alternative investments, including private equity and infrastructure.


These investments are characterised by a non-cyclical revenue uncorrelated to economic cycles with expected investment returns substantially higher than the bond interest rate. The investments are undertaken by the teams PensionDanmark Alternative Investments and Copenhagen Infrastructure Partners (CIP).


For example, through CIP, PensionDanmark has become one of the leading investors in renewable energy in the UK – offshore and onshore wind farms and biomass plants.


The Danish pension system assures a financially robust quality of life after retirement. Nevertheless, many people (who are in good health) choose to delay retirement up to five years.

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