Pensions

1. Pensions Pensions should cover your potential risk of losing your income, i.e.: Risk of losing working capacity Risk of dying And your risk of surviving 

2. Types of Pensions • Annuity pensions (Ratepension) • Periodic payments policies – life annuity (Livrente) • Retirement pension (Aldersopsparing) • Pensions for the self-employed • ”ATP” – compulsory scheme when you work • ”SP ” – compulsory – currently suspended (Special Pension) • Pensions no longer available • Capital pensions - lump sum • ”LD” • ”Selfpension” • Indexed schemes

3. Tax and pension • Contributions are tax deductible for all annuity pensions (certain rules apply) (not retirement pension) • Amounts paid out are taxable as personal income (not retirement pension) • Tax on return on investment when placed in pension schemes = 15.3% for all types of investments

4. Annuity pensions • When can you make an annuity pension? • Before you turn 77 years old. • How much can you pay? • 2015 Max. DKK 51,700 • How is the money paid out? • As a fixed amount per month for 10 - 25 years • The payments will affect your benefits from the state • Tax aspects • Fully tax-deductible in ”personal income” • When paid out - taxed as ”personal income”

5. Periodic payments policies (life annuities) • Several types now apply • Original type as a core insurance product – i.e. Life long payments after 62 years – payments stop when you die. • Now a optional guaranteed payment is available to your family – but making the life annuity smaller • Possible to obtain a smaller annuity payment for your spouse and/or children - either for life or time restricted. • Everyone can open an account regardless of age • Is often opened after 62 years • Rules for contributions and payments of income tax follows annuity pensions until now • Since 2010 – the only pension scheme with unlimited contribution rights

6. Retirement Pension • NO tax relief when paid into the scheme • No tax paid on pension when paid out as a lump sum (can be paid out in several lump sums) • Must be paid out before 75 years • PAL tax like the rest of the pension schemes. I.e. 15.3% tax on ongoing return from the scheme

7. Pensions for the self employed • Company closure rules (Ophørspension) • Profit from sale of the company can be transferred to a pension scheme – certain limitations apply AND/OR • 30% of the annual profit in the company can be paid into pension schemes

8. ATP • All employees • Ca. DKK 3.000 p.a. paid by the employer • Of which DKK 1.000 is your own contribution • Paid from 65 years • Life long pension DKK 25.000 (max.) • For further information • http://www.atp.dk/X5/wps/wcm/connect/atp/atp.com/private

9. Pensions – how much do I need? • Individual requirement • Dependant of expected time in retirement • Expected pension age • Life expectancy • Expected consumption and costs • Use 70%/50% - discuss if annuity pension should be 10 or 15 years (see above – expected time in retirement) • Find PV (is difficult with life-annuities…) • PV = savings = FV when you have to calculate PMT • PMT calculation depends on risk profile (I) and number of years to save up (N)

10. Calculate PMT = how much to save per year?

11. Typical work place pension scheme

12. Pension target minus state pension and atp

14. TASK – Peter Hansen Peter wants 70% for 15 years and 50% for the rest of his life time: