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Investments & Pension plans, retirement planning

When we talk about the planning of retirement, there are many factors that need to be taken into account. Some important questions to ask yourself are:

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  • How long will it be before I retire?

  • How much money will I need when retired

  • And will my need for income change during the retirement period


 

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Since it is often quite large sums to be spent, it will be a really good idea to start planning your retirement life well in advance of the day. 

In general, it can be said that the Danish pension system is a complex entity. A pension system must solve many different tasks at the same time. Quite simply, it can be said that a pension system must ensure that all citizens have a sufficient income throughout their retirement life, regardless of what working life they may have had.

The history of the Danish pension system

 

The pension system has its roots all the way back to the Danish constitution in 1849. In 1891, the old-age pension law was introduced. It was to ensure that vulnerable elderly people who had citizenship and residence in Denmark could apply for a modest old-age benefit if they were +60 years of age and "worthy of need". The old-age pension law was changed in 1922. Thereafter, everyone who lived up to the requirements and whose income and assets were below a certain amount was entitled to receive the financial benefits.


 

The structure of the Danish pension system

 

The Danish pension system is structured in three main groups, as is the case in many other countries. The three groups play very different roles, each of which contributes to making the Danish pension system one 

of the best in the world. The 3 groups look like this:

 

 

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State retirement pension, social benefits and Labour Market Supplementary Pensions (ATP) 

 

The first group consists of the state retirement pension (the national pension and supplementary social benefits as heating subsidies) and ATP Lifelong Pension. This is collectively called the basic pension. The basic pension must protect against poverty and ensure risk sharing between citizens. This part creates in other words, a basic security for all individuals. The state retirement pension and ATP Lifelong Pension are all approved by law, but while the state retirement pensions are tax-financed, ATP Lifelong Pension is savings-based.


 

The state retirement pension is basically a benefit to which all Danish citizens over the state pension age are entitled. However, you must have lived in Denmark for 9/10 of the period from the age of 15 until retirement age, in order to obtain full benefit.

Once you’ve read the text on the topic, it’s time to test your knowledge.

Solve the following practice exercises!

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