The Danish government earned DKK 13bn in revenue from the country’s pension yield tax (PAL), the second lowest amount in 10 years.

Insurance and Pension Denmark (I&P Denmark) said that although the figure is significant, it is lower than in previous years due to the rule that allows people to carry forward deficits from years with negative returns, which characterised 2022.

“Not all Danes are aware of it, but the tax on our pension returns delivers a significant amount of billions to the treasury every year. This was also true for 2023, even though offsetting from the deficit from 2022 means that it will be lower than otherwise,” I&P Denmark CEO, Kent Damsgaard, said.

However, the PAL tax has generated total revenue of more than DKK 600bn since its introduction in 2000.

“Pension savings secure the Danish economy, but they also support the national economy and welfare through the pension tax.

"It's frankly crazy that a small secret tax on Danes' pension returns makes such a huge contribution to the Danish treasury and the Danish economy. But the pension wealth of Danes has taken over the role in the economy that North Sea oil played years ago,” Damsgaard said.

Damsgaard added that the association is calling for the PAL tax to be included on individual annual tax return in line with other taxes that Danes pay to make it more transparent.

I&P Denmark estimates that the majority of the deficit carried forward from 2022 is now gone after Danmarks Nationalbank earlier this year estimated the total return in 2023 at DKK 377bn. The revenue from the PAL tax for 2023 comes mainly from the return to customers with average interest rate products in the same way as in 2022.

"Pension customers with an average interest rate make roughly the same contribution to the PAL tax every year. We saw this in both 2022 and 2023," Damsgaard said.

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