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Why is the number of pensioners in Denmark decreasing?

2021 saw a drop in the number people who receive Denmark’s folkepension state pension.

Published: 20 April 2022 12:58 CEST

retired people on holiday in norway

A later retirement age means seniors in Denmark must wait linger before heading into retirement. Photo by Alan Billyeald on Unsplash

A reduction of 15,000 pensioners was recorded in a 12-month period by national agency Statistics Denmark, with a total of 1,077,000 in 2020 dropping to 1,062,000 last year.

That appears paradoxical given the trend towards higher life expectancies in Denmark.

But there are several reasons to explain the statistic, according to Anne-Louise Lindkvist, head of markets and customer consultation with pension fund Sampension.

“The trend is not least due to the retirement age increasing in recent years and that Danes generally stay on the labour market for longer and retire later,” she said.

The most recent change to Denmark’s retirement age, at which residents can claim the state pension, saw it increase by six months to 67 years on January 1st 2022.

Denmark’s welfare economy stands to benefit from more people drawing pensions at a later age, according to Lindkvist.

But it also impacts the private financial situations of individuals, she said.

“Later withdrawal from the labour market means a longer period of wage income and also more years spent paying into pensions, boosting pensions savings and thereby incomes during years as a pensioner,” she said.

The next planned change to Denmark’s retirement age will see it increase by another year to 68. That is scheduled to take effect in 2030.

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How has Brexit affected pensions for Brits in Denmark?

Moving from the U.K. to Denmark involves many more hurdles since Brexit came into affect on January 1st 2021. One of these involves pensions.

Under HM Revenue and Customs rules, in order to open a new pension scheme, customers need to be a resident in the UK.

You can claim a State Pension abroad if you’ve paid enough UK National Insurance contributions to qualify. The payments can be made into your bank account abroad or into a UK bank account.

However, since Brexit, some banks have started to close down their UK services to British citizens who live abroad. This means people have had to transfer their pension to the country they live in.

“In the UK, 25 percent of your pension is tax-free but in most countries it’s all taxable. So you might want to take it out before leaving the UK and then decide what you’ll do with the remainder,” Jason Porter, director at expat specialist financial adviser Blevins Franks, explained to The Local.

“Pretty much most banks prior to Brexit had been going through a consolidation, of withdrawing from European operations so closing down operations in European countries. Then came along Brexit, and it became a perfect storm for people who are living abroad. They need somewhere to receive money in the UK and it’s been quite difficult for a lot of them. Internet banks have filled the gap for many people,” Porter said.

READ MORE: REVEALED: Danish banks’ policies on non-Danish speaking customers

Private pension providers are less likely to offer cross-border services post-Brexit. This is because “passporting” rules that allow financial institutions to provide services across the EU have ended and instead they have to apply for a licence for each EU country.

“Some pensions only pay into UK bank accounts and that’s a difficulty for non-residents if there is no representation in the country they’ve moved to. Look at whether your pension scheme pays out abroad before you move,” Porter said.

If your pension does pay out abroad, you will have to include those pension payments in your Danish income tax assessment. When your tax is calculated, the tax you’re already paying on your pension from abroad, will be taken into consideration. If this is less than Danish tax then you will have to pay the difference. Those claiming pensions from the United Kingdom can apply online here.

You can still qualify for the Danish state pension if you have lived and worked abroad but the amount you will receive depends on how many years you have lived in Denmark. If you want to apply for a Danish pension and foreign pension, you need to contact the Danish agency responsible for paying out state pensions, Udbetaling Danmark.

READ MORE: What foreign residents need to know about Denmark’s pension rules

The main advice from Jason Porter of Blevins Franks is to speak to someone about your pension before you’ve actually left the UK.

“Perhaps look at what you can do from restructuring. Can you transfer to a European pension scheme? Understand what your situation is going to be before you actually move because for some countries, getting the advice after moving can be too late to make adjustments,” he said.

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