The Danish parliament has adopted new rules that will mean that payments for old-age pensions will not be offset against certain social benefits, such as housing benefit.

Until now, payments for old-age retirement savings have been offset against certain social benefits for households.

Danish pension company Sampension said the new rules would make it more attractive to save for a pension via old-age pensions.

"With the new rules, the negative effect that has so far meant that offsets can take place in any subsidies that the household receives from the public sector, such as housing benefit, because you pay into retirement savings via your employer,” commented Sampension head of customer advice, Anne-Louise Lindkvist.

“This means that retirement savings, which are already an attractive form of savings, will be even more advantageous in the future, and there is of course good reason to be aware of that.”

Analysis from Sampension showed that, under the previous rules, a household receiving subsidies for free space and housing allowance, with a person in the household paying into old-age retirement savings, would have lost around DKK 550 a month in subsidies.

Under the new rules, this offset will be abolished, which Lindkvist said would generate several advantages to retirement savings.

"Firstly, the payments are tax-free and are not set off in the national pension supplement, in contrast to instalment pensions and lifelong retirement pensions, where set-offs can take place,” she stated.

“In addition, the return on contributions to retirement savings is taxed at 15.3 per cent during the savings period, which is far milder than if you save up free funds, where the taxation of the return is between 27-42 per cent.

"However, despite the advantages, retirement savings have not yet gained widespread use in this country, and this can, among other things, connected with the fact that many Danes do not know about the possibilities.

“That is too bad. Too many pension savers could benefit from paying into retirement savings, which especially applies to Danes who are not top-rate taxpayers, but instead pay basic tax in working life and as pensioners."

An Epinion survey carried out for Sampension found that 73 per cent of Danes have either ‘never heard of retirement savings’, ‘have heard of but know almost nothing about retirement savings’ or ‘know a little about retirement savings’.

One in five (20 per cent) stated that they know retirement savings ‘fairly well’ or ‘really well', while the remaining respondents answered ‘don't know’.

In 2024, Danes can pay DKK 9,100 into an old-age savings account, compared to DKK 8,800 in 2023.

Danes who have seven years or less until the national pension age must pay DKK 58,900 into an old-age savings account in 2024, compared to DKK 56,900 in 2023.

---