Denmark: New Early Retirement Option
From 2022 a new “early pension” option will be available to Danes completing 42 years of employment.
For many years the direction of travel has been to increase retirement age, reflecting longer life expectancies, and asking people to work for longer to receive a full state pension. In December 2020, Denmark’s parliament passed a law that will allow people who have completed at least 42 years in the labour market to retire and start receiving an early pension (tidlig pension) before they reach normal retirement age for the state pension. The introduction of a means-tested early pension recognises that some occupations are more physically demanding (making it harder for individuals to continue working well into their 60s) and that some start in the labour market earlier than others.
From 1 August 2021 individuals aged 61 or over will be able to apply for the new early pension, with the early pensions coming into payment from 1 January 2022 onwards.
To qualify for an early pension, individuals must have completed at least 42 years of employment (generally taken as years of ATP contributions – ATP is Denmark’s mandatory supplementary pension fund that provides old-age benefits) between age 16 and age 61, the cut-off age for qualifying employment. Those who have completed 42 years can receive the early pension 1 year before normal retirement age for the state pension, and those who have completed 43 or 44 years can receive their pension 2 or 3 years early, respectively.
The full early pension is equal to the full state pension (folkepension) paid to a single person at normal retirement age, which is DKK 13,853 per month in 2021. The pension amount is not affected by other pension income, but it is reduced if the pensioner has gross annual earnings exceeding DKK 24,000 (2020) or pension assets exceeding DKK 2 million (2020). The early pension stops when the pensioner reaches normal retirement age (currently age 67) and starts receiving their state pension.
As the normal retirement age for state pension benefits increases – both scheduled increases by birth year and future increases linked to changes life expectancy – so will the cut-off age for qualifying employment and the years of employment needed to qualify for the early pension.
Contacts
Isabel Coles
Head of International Consulting, MBWL International
VIEW PROFILE
Email:
isabel.coles@mbwl-int.com
Tel: +44 20 3949 5710
Isabel Coles
Head of International Consulting, MBWL International
A multilingual expert in employee benefits for multinational corporates.
Isabel heads up MBWL International, advising multinational organisations on their employee benefits arrangements around the world, with a focus on corporate sales and purchases, accounting disclosures and the financing, risk management and design of benefit plans.
Her vast experience includes leading global accounting consolidations under international, UK and US accounting standards for multinational companies headquartered in the UK and overseas – with consolidations ranging in size from two to over 50 defined benefit plans.
She has advised both corporate and private equity buyers on the employee benefit considerations (including pension liabilities) associated with corporate sales and purchases in Europe and worldwide, from due diligence through to closing and subsequent integration work. Isabel has also undertaken many benefit audits and benchmarking exercises, including a 25-country audit for a company in the technology sector.
Other areas of Isabel’s expertise include reviewing and establishing international pension plans, advice on individual expatriate employee benefit packages and supporting multinationals in agreeing and implementing global governance approaches and policies for managing their employer benefit plans.
Isabel chairs the International Committee of the Association of Consulting Actuaries and is fluent in German and French.
Contacts
Isabel Coles
Head of International Consulting, MBWL International
VIEW PROFILE
Email:
isabel.coles@mbwl-int.com
Tel: +44 20 3949 5710
Isabel Coles
Head of International Consulting, MBWL International
A multilingual expert in employee benefits for multinational corporates.
Isabel heads up MBWL International, advising multinational organisations on their employee benefits arrangements around the world, with a focus on corporate sales and purchases, accounting disclosures and the financing, risk management and design of benefit plans.
Her vast experience includes leading global accounting consolidations under international, UK and US accounting standards for multinational companies headquartered in the UK and overseas – with consolidations ranging in size from two to over 50 defined benefit plans.
She has advised both corporate and private equity buyers on the employee benefit considerations (including pension liabilities) associated with corporate sales and purchases in Europe and worldwide, from due diligence through to closing and subsequent integration work. Isabel has also undertaken many benefit audits and benchmarking exercises, including a 25-country audit for a company in the technology sector.
Other areas of Isabel’s expertise include reviewing and establishing international pension plans, advice on individual expatriate employee benefit packages and supporting multinationals in agreeing and implementing global governance approaches and policies for managing their employer benefit plans.
Isabel chairs the International Committee of the Association of Consulting Actuaries and is fluent in German and French.