The Danish parliament has reached an agreement that will stop cash assistance recipients being forced to withdraw and spend part of their pensions before they can continue receiving cash assistance.

Under the rules, those receiving cash assistance must, after six months, withdraw and spend their pension savings that exceeded DKK 50,000 for single people and DKK 100,000 for spouses or cohabitants.

Those people could then only start receiving cash assistance again once that withdrawn money was used up.

The government and political parties SF, the Conservatives and the Radicals agreed to remove this rule, and cash assistance recipients will no longer be forced to withdraw their pensions and spend them.

A political agreement had previously been reached to remove the rule last year, but it was not adopted before the general election was called.

According to calculations by Forsikring & Pension (F&P), between 2017 and 2021, pensions of more than DKK 60m had been withdrawn and taxed.

On average, each person withdrew DKK 200,000, corresponding to those affected having to withdraw and average of half of their total pension savings.

“It is fantastic that the politicians are shutting down the practice that cash assistance recipients have been punished for having saved up for a pension,” commented F&P CEO, Kent Damsgaard.

“This has caused a group of citizens to lose confidence in our pension system, as they have suddenly been asked to live off their pension many years before it was intended.

“It is fundamentally wrong to punish citizens who have exercised due care and saved for retirement.

“As the rules have been until today, cash assistance recipients should be forced with one hand to withdraw the pension and live on it - and with the other hand at the same time be required to save for a pension with ATP.

“The withdrawn pension savings are even subject to fire tax at 60 per cent, as they are withdrawn prematurely. Fortunately, the Danish parliament has put an end to that with today's political agreement.”

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