The Danish pension system comprises several schemes:
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Old-age pension, a tax-financed scheme with basic age-related payments payable to all citizens irrespective of any previous labour-market attachment
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Labour-market/company pension schemes initiated as an aspect of employment conditions and to which both employees and employers make contributions
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Private pension plans
In addition to the old-age pension, the mandatory schemes comprise the Labour Market Supplementary Pension Scheme and the Special Pension Savings Scheme. Even though voluntary schemes and collectively agreed labour-market pension schemes are gaining ever more ground, the old-age pension scheme and the Labour Market Supplementary Pension Scheme still represent the primary source of income. Old-age pension therefore remains the cornerstone of Denmark’s pension system.
For a number of years, the old-age pension retirement age was set at 67. In connection with the 1999 Finance Act and the pre-retirement scheme compromise an agreement was reached to lower the old-age pension age as of 1 July 2004 to 65 for people reaching the age of 60 after 1 July 1999. In practice, the lowering was only fully implemented as of mid-2006, so that people born before 1 July 1939 can still retire at the age of 67, while people born after 1 July 1939 can retire at the age of 65.
To be eligible for old-age pension, people must meet a range of conditions of nationality, residence and qualifying period.
The principle of qualification for old-age pensioners rests on the actual period of time, in which the individual person has resided in Denmark between the ages of 15 and 67. The eligibility for full old-age pension is conditioned on 40 years’ fixed residence in Denmark between the ages of 15 and 67. If a person cannot meet the requirement of 40 years’ residence in Denmark as stipulated in the Danish Social Pensions Act, the person will only receive a share of a full Danish pension, corresponding to the share of the 40 years the person has resided in Denmark.
The old-age pension consists of a basic amount and a two-level pension supplement. Single pensioners receive higher pension supplements than married or cohabiting pensioners. A pension lump sum supplement is payable (older people's cheque) to the financially weakest pensioners. Old-age pensioners are also entitled to financial supplements such as personal supplements, winter fuel payment, pensioners' rent allowance, reduced property value tax, reduced TV subscription and various individual discount schemes. Pension supplement, additional pension supplement, personal supplements and pensioners' rent allowance are all income and asset dependent. The basic amount is also income dependent, but only reduced when the personal labour income exceeds DKK 252,400 (2007).
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