Text: Narcis George Matache
Amid a Corona second wave, more substantial than the first one. The political scene, the media and in general the lunchtime discussions, got locked into the same topic at the time of going to press: with the workplace sexual aggression scandal. On this backdrop of sexual discrimination cases, some even decades old, the prime minister Mette Frederiksen has made the state of the country speech, which marked the re-opening of the Danish Parliament (Folketinget). An address, unwelcomed by many, be that by climate activists or civil rights advocates, a speech that got lost into statistical details. Yet, for our older generation in Denmark, some had reason to celebrate, as they now have the right to an early pension from January 2022."
So, what does this have to do with me? Well, let's fast forward to the year 2063. I’ve finally turned 73, and those retirements checks are beginning to appear in my bank account, or so I was led to believe. It seems that due to an increase in life expectancy combined with a massive automatisation and digitalisation, there are too few workers to carry the burden of the Danish welfare system. The new government is working on a solution to the problem. Well, not really a solution, just another delay. Increase the retirement age to 80 - that is if you have time to enjoy retirement.
The pension crisis is just another stumbling block for my generation, together with the expected massive unemployment crisis, and the effects of climate change. Will we ever get to retire? That is a question that remains unanswered for many post-Soviet born children. However, the above is not meant to terrify you, merely food for thought for the future. Now, we should focus on making the current pension system fairer.
The government has made an important step in that direction by allowing the citizens with the longest working lives to retire earlier. Therefore, if you’ve worked for 44 years, you can retire 3 years before retirement age, 2 years early if you’ve worked 43 and 1 year early if you’ve worked 42 years. Included in the working years are unemployment periods, sick leave, maternity leave, part-time work and internships. This will cost us 3,5 billion DKK annually, and it will be financed by taxation on the financial world.
The Danish pension system
You can find out about your pension rights by logging into www.pensioninfo.dk and can even calculate the amount a spouse can receive in case of death (wink wink). Joking aside, knowing more about your pension and how to prepare yourself for retirement, can ensure peace of mind.
The Danish pension system can be divided into three pillars: the public-sourced, the labour market and the individual voluntary schemes.
"The government has made an important step in that direction by allowing the citizens with the longest working lives to retire earlier."
With every citizen (including European non-Danish) once you reach the retirement age of 66 in 2020, you will receive a minimum universal old-age pension of 72000 DKK per year. That old-age pension will be supplemented with 76800 DKK yearly if you have less than 82600 DKK in liquid wealth. If you earn from other incomes more than 556400 DKK yearly, then you lose the universal pension.
Also, in the first pillar, there is the disability pension and the labour market supplementary pension scheme (ATP). For a full-time employee, the monthly contribution to ATP should be 95 DKK, supplemented with 189 DKK by the employer. The ATP contribution also continues during periods of unemployment.
Labour market pension schemes represent another source of income during retirement. The pension benefits depend directly on the contributions paid and the accumulated return on savings. The contribution rate can be between 5 and 18%, and it depends if a union-negotiated collective agreement covers your work contract or a firm established fund. Unfortunately, not every employee has access to a labour market pension scheme.
Private pension savings plans are started on the initiative of individuals and are independent of employment conditions. In these schemes, one makes its own choices about the size of the contributions. Individual pension schemes can be set up with banks, insurance companies or pension funds as defined contribution plans.