Foreign employees pensions

When you start working at AU, a labour market pension will be set up for you as part of your employment contract. You can choose between three different types of labour market pension.


About the Danish pension system

What you need to know about the labour market pension

In Denmark, there are three different types of pension: statutory pensions, labour market pensions, and individual pensions. As an employee of AU, you will automatically be part of a labour market pension.

Labour market pension

When you start working at Aarhus University, a labour market pension scheme will be set up for you as part of your employment contract. Here are some things you should know about the labour market pension system in Denmark.

A pension is one of your employment rights

When you work at Aarhus University, you are considered a state employee, which means that you are covered by a pension scheme as part of your employment (pursuant to the collective agreement for university graduates employed in the state sector). It is mandatory to pay into a labour market pension scheme, and the scheme is based on solidarity. For this reason, a fixed contribution – based on your salary – is paid into a pension fund every month. If you are eligible for and opt for the pension exemption scheme, this contribution is paid out to you as salary instead.

Your academic background determines your pension fund

The collective agreement for university graduates employed in the state sector stipulates that university graduates employed in the state sector in Denmark are connected to a specific pension fund based on which degree they have.

Your pension contribution might cover other fees and insurance policies

Your pension contribution is paid into your pension fund from your salary. This contribution covers your pension but, in most cases, it also covers an administration fee and various other insurance policies (such as group life insurance and insurance to support your family if you’re unfit to work).

Ask your pension fund about these fees and insurances and whether they are mandatory.

Danish labour market pension funds are private companies

Please be aware that pension funds in Denmark operate as private companies, which means they all have different fees, policies and investment portfolios.

Danish pension funds invest savings on market terms

Pension funds in Denmark invest pension savings on an ongoing basis and on market terms. This means that you may see fluctuations in your pension savings.

You can ask your pension fund about their investment portfolio, as you might be able to choose between different portfolios.

The Danish pension system

In Denmark, there are three different types of pension: statutory pensions, labour market pensions, and individual pensions.

  • Statutory pensions are pensions that the public sector controls. These include the Danish state pension (Folkepension) and disability pensions. There are also other pension schemes, such as ATP Livslang Pension (Lifelong Pension), which cover almost everyone.
    Please note: In some cases, international members of staff can qualify for the Danish state pension. 
    Read more about the Danish state pension.
  • Labour market pensions are pension agreements that are set up for you as part of your employment contract. This is the type of pension that you should know about, as you will need to choose between the three different options (see below) as a new employee at Aarhus University.
  • Individual pensions are schemes that you set up yourself via a pension fund or bank.

3 pension schemes to choose from

1. Ordinary Pension Scheme

Overview of the scheme

  • Your pension contributions are not taxed, but your pension is taxed when it is paid out.
  • An option for all international staff members employed under the collective agreement for university graduates employed in the state sector (‘AC-overenskomsten’).
  • Your monthly pension contribution is calculated at 17.1 % of your base salary plus any pensionable supplements.
  • A way of saving capital for your future.

How will my pension be taxed?

Under this scheme, pension contributions are exempt from taxation when they are paid into the pension fund. This means that you will not need to pay tax on pension contributions transferred to your pension fund. Instead, tax will be deducted when you request that your pension savings are paid out. Any return on the investment will be taxed at 15 % (PAL tax), which is lower than the usual rate of tax for returns on investments in Denmark (on average 38-42 %).

If you choose to take out your pension savings when your employment ends and you’re not of retirement age, the current taxation rate and administration fee is approximately 60%. If you choose to take out your pension savings when you reach retirement age, the taxation rate will depend on your tax situation and the prevailing pension tax legislation at that time.

Ordinary Pension Scheme requirements

The Ordinary Pension Scheme is an option for all international staff members.

Your pension contribution may include different insurance policies

The Ordinary Pension Scheme offers flexible insurance cover and can be arranged to match your personal situation.

The scheme often includes:

  • Disability insurance, which will provide you with financial security if you are unfit to work
  • A pension for your partner/children, which will provide your family with financial security in the event of your untimely death
  • Group Life Insurance

Contact your pension fund for more information.

2. International Pension Scheme (section 53A)

Overview of the scheme

  • Your pension contributions are taxed, but your pension is not taxed when it is paid out.
  • An option for most academic staff members employed under the collective agreement for university graduates employed in the state sector (‘AC-overenskomsten’).
  • Your monthly pension contribution is calculated at 17.1 % of your base salary plus any pensionable supplements.
  • A way of saving capital for your future.

How will my pension be taxed?

Under this scheme, your monthly pension contribution will be taxed immediately as salary according to your current tax status when it is transferred to your pension fund. This means that you will pay income tax on your pension contribution every month.

First a labour market contribution of 8% will be deducted from your salary. If you are part of the researcher taxation scheme with a flat tax rate of 27% (not applicable for PhD fellows), your remaining pension contributions (after your labour market contribution has been deducted) will be taxed at 27%. If you are subject to ordinary taxation rules, your remaining pension contributions (after your labour market contribution has been deducted) will be taxed according to your taxation status as stated on your tax card.

In return, as a general rule, your pension will not be taxed when it is paid out to you upon retirement (in contrast to the ordinary pension contribution scheme outlined above).  

Furthermore, if you leave Denmark and choose to have your pension savings paid out in cash before retirement age, this payout (as a general rule) will not be taxed in Denmark.

International Pension Scheme requirements

To be eligible for the International Pension Scheme you must:

  • be employed under the collective agreement for university graduates in the state sector
  • have a degree within one of the fields represented by the pension funds Akademikerpension, Sampension, P+, PFA or PFAD

Degrees represented by Akademikerpension:

Degrees within:

  • Humanities
  • Natural science/sciences
  • Social studies
  • Social science
  • Medical science
  • Health sciences

Degrees represented by Sampension:

Degrees within:

  • Architecture  
  • Agricultural Science
  • Horticultural Science
  • Landscape Architecture

Degrees represented by P+:

Degrees within:

  • Economics, political science or social science
  • Law
  • Engineering

Degrees represented by PFA:

  • Degrees in all fields

Degrees represented by Pensionskassen Arkitekter og Designere:​​​​​​

  • Degrees in architecture and design

Your pension contribution may include different insurance policies

Some pensions schemes also include different insurance policies. AU suggests that you ask your  pension fund which insurance policies you’re paying for and how much they cost – and whether they might be arranged to match your personal situation.

3. Pension Exemption Scheme

Overview of the scheme

  • Your pension contribution is paid out as salary for a maximum of five years.
  • An option for some international researchers employed on a fixed-term contract under the collective agreement for university graduates employed in the state sector (‘AC-overenskomsten’).
  • Your monthly pension contribution is calculated at 17.1 % of your base salary plus any pensionable supplements.
  • A way of saving capital for your future.

How will my pension be taxed?

Pension exemption means that an amount equivalent to your pension contribution, calculated at 17.1 % of your base salary plus any pensionable supplements, will be paid out with your monthly salary. Once your payment to the Danish Group Life Insurance has been deducted (DKK 108.35 a month), this amount will be taxed according to your current income taxation status – either at 27% if you are covered by the researcher taxation scheme (not an option for PhD fellows) or at the rate specified on your ordinary Danish tax card.

Pension exemption requirements

To be eligible for pension exemption, you must meet the following requirements:

  • You must be employed in a position that is part of the academic job structure or in a PhD position. For example, you must be employed as a researcher, research assistant, PhD fellow, postdoc, assistant professor/researcher (not tenure track), associate professor/senior researcher or professor.
  • You may not have Danish citizenship
  • You must be employed on a fixed-term contract – maximum of five years
  • You must have been recruited from outside Denmark (this means that if you were recruited to AU from a non-academic position, a private position or from being unemployment in Denmark, you are not eligible for this scheme).

Specific conditions for the Pension Exemption Scheme

If your employment is extended or transferred to another university in Denmark

If your employment at the university is extended, or if you change your place of employment from Aarhus University to another university in Denmark, your pension exemption will remain in effect for a maximum total term of five years (six years if agreed with your trade union representative and your department).

Pension exemption cannot be retroactive

The pension exemption agreement cannot be retroactive. This means that any pension contribution already made by the university to the relevant pension fund is irreversible.

Already an employee?

Existing members of academic staff can also opt to have their pension contribution paid out as salary for the remaining part of their fixed-term employment, but only for a maximum of five years – and only if they meet the criteria described above. If you request to have your pension contribution paid out as salary, this will come into effect from the next possible salary payment. It is not possible to have contributions you have already paid towards your pension scheme refunded.

Administrative staff are not eligible for the Pension Exemption Scheme.

Your pension contribution only includes Group Life Insurance

If you choose the Pension Exemption Scheme you will be covered by the Danish Group Life Insurance. It is mandatory by Danish law to pay into and be covered by this insurance. Read more about Group Life Insurance.

If your employment term continues beyond the five-year limit or is changed to permanent employment, your Group Life Insurance will be cancelled and pension contributions will be paid to the pension fund pursuant to the rules set out in the collective agreement.

Consider taking out additional private insurance

The Pension Exemption Scheme does not include the same insurance policies as the Ordinary Pension Scheme and the International Pension Scheme. It only includes mandatory Group Life Insurance, which provides basic insurance in the event of critical illness or death. For this reason, if you choose the Pension Exemption Scheme, you may wish to consider taking out additional private insurance.

What should you do once you have read about the three options?

After reviewing the different options and seeking advice from the relevant pension fund or the Danish Customs and Tax Administration, you need to inform Aarhus University which pension scheme you have chosen.

Your HR department will ask you to complete the form below and to indicate your chosen pension scheme before you receive your work contract. You should return the form to your HR partner before your employment begins.

Download the pension scheme form

Aarhus University’s recommendations

AU's recommendations

As an international member of academic staff, you need to choose between three different labour market pension schemes before you start work at Aarhus University. 

We recommend that you read about the Danish pension system before you choose one of the three schemes. 

Aarhus University recommends you seek individual advice 

Your pension is important, and AU recommends that you seek individual advice from the relevant pension fund and the Danish Taxation Authorities before choosing which pension is right for you.

Where to seek advice

  • If you have questions regarding your pension, fees, and insurance policies, you can reach out to the relevant pension fund (free of charge) before choosing your pension scheme. See the contact information on the right.
  • If you have questions regarding how your pension is taxed, you can reach out to the Danish Customs and Tax Administration (the Danish Taxation Authorities).

Disclaimer

AU strives to ensure that all the information provided on this webpage is correct but takes no accountability for errors or inaccuracies. As such, reading this page cannot replace seeking individual advice.

FAQ

Do you want to save up extra pension?

If you wish, you can pay a higher percentage of your salary into your pension fund. Ask your HR department how to do this.

Can I change from one scheme to another?

If you want to amend your choice of pension scheme, please inform your HR department. They will register the change and it will take effect from the following month’s salary payment. Keep in mind that retroactive changes are not possible.

You can only change to the Pension Exemption Scheme if you meet certain requirements that relate to the time you were first recruited to an academic position in Denmark. Ask your HR supporter if it is possible for you to change to this scheme.

Leaving Denmark

Pension and tax when leaving Denmark

If you are leaving Denmark, you need to contact your pension fund. They can tell you in more detail what will happen to your pension when you leave Denmark. See the contact information on the right of this page.

Information about pension and tax when leaving Denmark  

  • Ordinary pension scheme

You can choose to have your pension savings paid out when leaving Denmark. If you do this, the current taxation rate and administration fee is approximately 60%. 

  • International pension scheme

You can choose to have your pension savings paid out when leaving Denmark. As a general rule, this payout will not be taxed in Denmark because you have already paid tax on your pension contributions.

  • Pension exemption scheme

You have not built up any pension savings. Your pension contributions (which have been paid out as salary) will end along with your salary when your employment ends. You have already paid tax on these pension contributions, so the money will not be taxed further when you leave Denmark.

  • ATP contributions

If you give your new address in your new country of residence to ATP (Arbejdsmarkedets Tillægspension) before you leave Denmark, they will contact you when you reach retirement age and inform you about the option of having your ATP contributions paid out.