Pension for academic employees
Pension for academic employees at universities and institutions of higher educations
As an international employee under a collective agreement, you can choose between two different pension schemes with each their advantages and disadvantages.
This communication describes the options of the two pension schemes. When you have read it, you must inform your employer about which scheme suits you the best.
Please also note that there are certain requirements that you must meet in order to be eligible for the different schemes. Your employer will inform us about which scheme you have chosen.
No matter which pension scheme you choose the schemes both serve as a way of saving capital for your future as well as an insurance policy that takes effect from the first day of your employment. The insurance cover consists of:
- Disability insurance providing you with financial security should you lose the ability to work.
- Spouse’s/cohabitant’s/children’s pension providing your family with financial security should you die untimely.
The insurance cover is flexible and can be adjusted to match your personal needs. For more information, please contact us.
The cover is the same for the two pension schemes described below, whereas the taxation is dealt with differently depending on the pension scheme you choose.
Ordinary pension contribution scheme
According to the collective agreement that applies to all academic staff your employer will transfer a monthly pension contribution to us accounting for 17.1 % of your basic salary plus pensionable supplements. For PhD fellows the monthly contribution is calculated as 17.1 % of 85 % of your basic salary.
In Denmark, payment of pension contributions is tax-exempt, and payment of pension benefits/pension savings is taxable.
If you choose to take out your pension savings before you reach the retirement age, the current taxation rate is 60 %. If you choose to take out your pension savings when you reach the retirement age, the taxation rate will depend on your tax situation and the prevailing pension tax legislation at the time.
However, you have the possibility of choosing a pension scheme under section 53A of the Pension Taxation Act even though you are subject to ordinary Danish income tax. If you choose the 53A pension scheme, your pension contributions are taxed at the tax rate according to your Danish tax card. The taxation rate will typically vary between 37-42 %.
With a section 53A pension scheme you can withdraw your pension savings without having to pay the 60 % taxation rate.
Ordinary pension contribution scheme subject to taxation according to section 53A of the pension taxation act
Under this scheme your employer will transfer a monthly pension contribution to us accounting for 17.1 % of your basic salary plus pensionable supplements. For PhD fellows the monthly contribution is calculated as 17.1 % of 85 % of your basic salary. The pension contributions are, however, taxed immediately according to your current tax status. This means that the pension contributions are paid from your taxable income, and the tax is paid on transfer to us.
If you are under the researcher taxation scheme with a flat rate of 26 % tax (plus 8 % labor market contribution), your pension contributions are taxed with approximately 32 % every month. If you are not eligible for the researcher taxation scheme, your pension contributions are taxed with the tax rate according to your Danish tax card. The taxation rate will typically vary between 37-42 %.
Whether you request your pension savings paid out at the end of your employment, or you keep your savings with us until you reach the retirement age payment is free of tax. Thus, you can take out your savings without having to pay any additional taxes.
Please note that bonus added to your section 53A pension scheme is subject to ordinary Danish income tax which typically varies between 37-42 %.
If you are employed under the researcher taxation scheme during your stay in Denmark, it does not make sense to choose the ordinary pension contribution scheme as your pension contributions will be taxed every month.
In order to be eligible for the section 53A pension scheme you must be employed under the collective agreement concerning Academic Staff Employed by the State.
Exemption from paying pension contributions
The Danish Ministry of Finance and the Danish Confederation of Professional Associations (AC) have agreed on a new protocol that makes it possible for all international researchers employed by a university or an institution of higher educations to be exempted from paying pension contributions.
This means that an amount equivalent to the pension contribution accounting for 17.1 % of your basic salary plus pensionable supplements is paid together with your monthly salary. This amount is taxed according to your current taxation status whether you are covered by the researcher taxation scheme or liable to pay tax according to an ordinary Danish taxation rate.
In order to be eligible for exemption from paying pension contributions you must meet the following requirements:
- Employment as a researcher, research assistant, PhD fellow, postdoc, assistant professor, associate professor or professor.
- Non-Danish citizenship.
- Fixed-term employment – maximum of five years.
- Recruitment directly from outside of Denmark.
If your employment as a researcher is prolonged, or you change place of employment from one university to another the exemption from paying pension contributions remains effective for a total period of maximum five years (six years if agreed with your trade union representative and your department).
The agreement about exemption from paying pension contributions cannot be retroactive. This means that any pension contribution already made by the employer to the relevant pension fund is irreversible.
If you choose to be exempted from paying pension contributions instead of ordinary pension contributions, you should be aware that you will not benefit from the insurance cover which is part of the pension scheme. Thus, it is advisable that you consider setting up additional private insurance. You will only be covered by the compulsory group life insurance policy which provides basic insurance in the event of critical illness or death.
It is advisable that you consider which pension scheme you prefer prior to your employment. If you choose one scheme and want to alter your choice at a later point, you must inform your employer. The employer will then register the change which will take effect from the following month’s salary payment, and the employer will notify us about the change. NOTE that retroactive changes are not possible.
Please note that unless you have informed your employer about your wishes for a pension scheme you will automatically become subject to the ordinary pension scheme.
Termination of employment – leaving Denmark
When your employment ends, and if you leave Denmark you have two options:
- You can keep your pension savings with us and claim the disbursements started when time is due.
- You can withdraw your pension savings when you leave Denmark.
Taxation of disbursement of your pension savings is mentioned above.
When you have chosen which pension scheme to join, you must inform your employer about your choice, and your employer will take the necessary steps to send the monthly contributions to us in accordance with the type of pension scheme you have chosen.
When we have received the first contribution from your employer, we will send you a welcome letter with further information including a pension statement.
Please note that – according to the Danish tax authorities – we must have information about your place of birth (city and country) if you choose a pensions scheme under section 53A.
You are always welcome to contact us if you need further information about the options described above or you want specific calculations e.g. in relation to an adjustment of your pension scheme.