The Danish government collected DKK 44bn in pension tax in 2025, according to Insurance and Pension Denmark, significantly higher than the DKK 36bn expected in the Economic Review.

The tax, known as the PAL tax, is primarily derived from pension companies' returns on retirement savings, which are estimated to amount to around DKK 40bn, according to I&P Denmark’s preliminary calculations. Additionally, there is a PAL tax contribution from banks of approximately DKK 4bn.

I&P Denmark’s estimations are based on information from pension companies, as well as estimates from financial institutions based on historical contributions.

"This is further clear evidence that the Danish pension model plays a key role in the Danish economy. When the industry once again delivers far above expectations through solid returns on investments in Denmark and around the world, it benefits society as a whole and the financing of welfare," I&P Denmark CEO, Kent Damsgaard, said.

The PAL tax was introduced in 2000, but returns of pension savings have been taxed since 1984. Denmark has one of the highest rates of PAL taxation in the world at 15.3 per cent.

I&P Denmark stated that this year’s figures emphasise that, despite continued high economic uncertainty, the pensions industry is managing to “generate solid returns”, leading to “substantial tax revenues”.

It argued that the contribution from pension tax is a clear example of how Danes' savings not only ensure financial security in old age but also contribute directly to the financing of the public sector.

However, the association said it should also be an “eye opener” about the strong position of the pension sector.

Damsgaard argued that the stronger the framework the industry has for investing and thus contributing to growth and value creation, the better it is for citizens and society as a whole.

“In this context, it is paradoxical that the Danish PAL rules are still designed in such a way that customers of Danish pension companies risk being double taxed on dividends when the pension company invests in Europe, as opposed to when they invest in the United States or Japan, for example.”

The association believes that abolishing double taxation on dividends when Danish pension savers' money is invested in Europe is a low-hanging fruit to pick that would strengthen Europe's competitiveness.

Indeed, I&P Denmark sent three “concrete proposals” for solutions to the Ministry of Taxation last spring, but no change has been made as of yet.

“I think the current geopolitical situation cries out for us to resolve the double taxation issue as quickly as possible. Politicians at Christiansborg should support this,” Damsgaard concluded.

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