FAQ – about Danish pensions

In both Sweden and Denmark the pension is divided into three components: a government component, a component financed by your employer and a private component. The biggest difference between the Danish and Swedish systems is the size of the various contributions to the pension system. The Swedish government pension is often bigger than the Danish equivalent, whereas people in Denmark normally have a larger occupational pension. However, not all Danish employers contribute to the pension of their employees via an occupational pension scheme.

Many workplaces in Denmark have a pension scheme that involves the employer paying two thirds of the contribution, and the employees paying the remaining third from their gross salary. Your part of the Danish company pension is therefore always deducted from the gross salary, whereas in Sweden the occupational pension is additional to the employee’s gross salary. Not all Danish employers have a pension scheme. Instead, you can make an individual agreement via your trade union, your bank or by contacting a pension fund.

Your pension will be paid by the country in which you earned it. This means that Denmark will pay you the pension you earned by working in Denmark. However, you must apply for the pension in your country of residence.
If you live in Sweden you therefore apply to the Swedish Pensions Agency for your pension.

If you have earned an occupational pension in Denmark, you must personally submit your request to the pension fund(s) to which you contributed.

You can leave your pension savings in your Danish pension fund until you retire. In certain cases you can also request the money to be paid out in advance. However, in that case you have to pay 60 percent tax on the amount, unless it is a 53 A§ pension. Talk to your Danish pension fund about how you can withdraw your pension savings. Normally you cannot transfer your pension savings to a Swedish pension fund, as this would be tantamount to terminating your Danish pension and withdrawing the money early.

When you withdraw your savings from a Danish pension fund while living in Sweden, the gross sum is regarded as taxable pension income which you need to declare in Sweden.  You will receive credit for the tax already paid in Denmark, but please note that pension income from Danmark will also affect the marginal tax on other income that is taxed in Sweden -e.g. salary from a Swedish employer.

In Denmark, the return on your pension savings is taxed at 15.3%. This tax is called PAL tax (Pensionsafkastbeskatningsloven) and pension funds deduct it yearly from your pension savings in Denmark.

Depending on the type of pension savings fund, you might also be subject to yield tax on your Danish pension savings in Sweden, if you are a Swedish resident. 

• If your pension funds are secured in a life or capital insurance policy, you will need to calculate and report the tax base for yield tax in your Swedish income tax return. More information is available on the Skatteverket website. 
  

Read more about Yield tax on foreign life insurance at skatteverket.se

As you have already paid the Danish PAL tax, you can request foreign tax relief.  

• Pension funds in a Danish occupational pension that are not secured in a life or capital insurance policy are not subject to Swedish yield tax.

• If you have a privately arranged pension savings plan in a Danish bank or credit institute, you should declare and pay tax for any ongoing capital income that these funds generate (ie interest, dividends capital gains), and request credit for the paid Danish PAL tax. 

When you live in Sweden and receive pension income from Denmark, the main rule is that you pay tax on the pension income in both Denmark and Sweden. Double taxation is eliminated by allowing you a credit for the Danish tax you have paid, up to a maximum amount (‘spärrbeloppet’) that corresponds to the portion of your total Swedish tax attributable to your Danish income.

However, some types of Danish pension income are not taxable in Sweden. These include: 

• Danish 53A§ pensions
  
  
• pension funds that are secured in a life insurance policy contracted prior to 1997
  
  
• payments from a privately arranged pension savings fund in a Danish bank or credit institute

Public pension from Denmark is exempt from tax in Sweden if you were resident in Sweden on April 4th 2008, received such benefits from another Nordic country on that date, and have remained continuously resident in Sweden since then.

If your Danish pension is not taxable in Sweden, you must still report the pension in your tax return, by ticking the box Pension and filling in the country and amount under the section 17, Other information.