Pensions in Denmark
Pensions in Denmark consist of both private and public pension programs, all managed by the Agency for the Modernisation of Public Administration under the Ministry of Finance. Denmark created a multipillar system, consisting of an unfunded social pension scheme, occupational pensions, and voluntary personal pension plans. Denmark's system is a close resemblance to that encouraged by the World Bank in 1994, emphasizing the international importance of establishing multifaceted pension systems based on public old-age benefit plans to cover the basic needs of the elderly. The Danish system employed a flat-rate benefit funded by the government budget and available to all Danish residents. The employment-based contribution plans are negotiated between employers and employees at the individual firm or profession level, and cover individuals by labor market systems. These plans have emerged as a result of the centralized wage agreements and company policies guaranteeing minimum rates of interest. The last pillar of the Danish pension system is income derived from tax-subsidized personal pension plans, established with life insurance companies and banks. Personal pensions are inspired by tax considerations, desirable to people not covered by the occupational scheme.
Also included in the Danish pension system are statutory supplementary pensions. These cover a significant portion of the population, sometimes much more than just the workforce. Supplementary pensions are institutionally and by ways of funding similar to the occupational system.
Historical Development
Early pension systems (1891-1960s)
Denmark introduced one of Europe's first formal pension systems with the Old Age Pensions Act of 1891, initially targeting low-income elderly. Following World War II, the Danish welfare state expanded significantly as part of the broader Nordic Model development. The state pension was established in its modern form in 1956, providing universal coverage to all Danish residents.Labour market pensions (ATP) - 1964
A major institutional innovation occurred in 1964 with the introduction of the Arbejdsmarkedets Tillægspension. This system was created through a tripartite agreement between government, employers, and trade unions, reflecting Denmark's strong tradition of labor market corporatism. The ATP introduced a funded, mandatory occupational pension layer that complimented the pay-as-you-go public pension.Occupational pension expansion (1970s-1990s)
From the 1970s onwards, Danish collective labor agreements increasingly included occupational pension provisions. By 1990, approximately 70% of the workforce had access to employer-provided pensions through collective agreements. These schemes gradually shifted from defined-benefit to defined-contribution models to reduce employer risk and enhance sustainability.Major structural reforms (2000s)
Following the 2006 Welfare Agreement, Denmark undertook comprehensive pension reforms aimed at ensuring long-term fiscal sustainability as life expectancy increased. Key changes included the introduction of automatic indexation of the retirement age to life expectancy and gradual increases in contribution rates. These reforms positioned Denmark as a pioneer in adapting pension systems to demographic change.Recent reforms (2010s-2020s)
From 2019 onwards, the retirement age became automatically indexed to life expectancy, with projections showing an increase to approximately 70 years by the 2030s. The 2022 "Ansvar for Danmark" agreement outlined further reforms to address labor shortages and ensure intergenerational fairness, including potential future increases in contribution rates.Public pensions
Universal social pensions
In Denmark, the public pension system is called the state pension. The pension consists of a basic income and a supplemental income. The basic income can be accessed at age 67 and the set amount is not determined by any hours a person may currently work. The supplemental income may be reduced based on net-earnings. As of 2025, the maximum monthly basic income for a single adult is DKK 7,198 and also DKK 7,198 per person for a married or a cohabitating couple. The monthly pension supplement maximum income for a single adult is DKK 8,329 and DKK 4,262 per person for a married or cohabitating couple. The pension supplement is means tested. For single tax payers, the supplement will reduced for those with an income at or higher than DKK 95,800 and eliminated for those earning DKK 419,300 and above. For married or cohabitating partners who are both pensioners, the supplement will be reduced when making DKK 192,000 or more and eliminated completely when making DKK 511,700 or more. See below:| Component | Single Adult | Single Adult | Married/Cohabitating | Married/Cohabitating | Notes |
| Basic Pension | 7198 | 1115.54 | 7198 | 1115.54 | Universal base benefit |
| Supplemental Pension | 8329 | 1290.85 | 4262 | 660.53 | Reduced with higher income |
To receive this pension, recipients must have had lived in Denmark for 40 years while they were between the ages between 15 and 65. If a resident has spent less than 40 years in Denmark, then they can still receive the pension, just at a proportionately reduced rate. Funding for this pension is not based on contributions, rather funds are secured from general tax revenue collected by the state. The non-earnings based public basic pension is the reason for the very low, 8 percent gender pension gap for those ages 65 and up by income type in Denmark, compared to other Nordic Countries with income linked public pensions, with Finland at a 24 percent gender pension gap, Norway 23 percent, and Sweden at 28 percent.
The Social Disability Pension program is financed by general tax revenues dependent on social and medical factors and is historically known as a standard disability pension program. The SDP evaluates the medical and social criteria on three levels: the first granting eligibility to individuals younger than 60 with minimal work capacity; the next level is for people younger than 60 who have the work capacity equivalent to one third of normal, along with individuals between 60 and 66 years of age with hardly any ability to work; lastly, the ordinary SDP level is granted to individuals with the work capacity below half of normal, based upon social and/or health criteria. All pensioners receive a minimum of 40 percent of their average earnings, and receive additional support through easily accessible universal healthcare and housing benefits.
Occupational pensions
are another type of pension, covering nearly 90 percent of the Danish workforce. These schemes are mandated by collective bargaining agreements made between employers and employees, usually at the sectoral level. Company wide plans do exist, but they are not as common as sector wide pensions. Payouts made by these types of schemes are also determined by the contributions made by employees and employers. Typically, employee contributions range from 9 to 17 percent of their salary, with the average amount being 11 percent. Generally, high wage earners contribute a higher percentage of their income to their pension than low wager earners.It is typical for the employer to contribute two thirds and the employee one third in the occupational pension system. Workers covered by different collective labor agreements are subject to mandatory participation, with varying contribution rates. Most plans depend on defined-contribution schemes, often including death and disability benefits.
In 1998, the labor force was recorded to have contributed about 4% of their gross salary to pensions, and in 2002, 77% of the labor force contributed over 7%, exemplifying a steady growth in the average contribution rate. Depending on the plan, payouts can be collected in the form of phased withdrawals, lump sums, or life annuities.