The Danish pension association has criticised changes to pension taxation as simply a means of reducing the country’s budget deficit while damaging its welfare state.
Finance minister Bjarne Corydon said the government needed to pursue a “responsible economic policy” and therefore was altering the level of tax rebate offered to pension savers in an effort to reduce the deficit by 0.75% of GDP.
Denmark is taking the measures to ensure it does not exceed the EU’s 3% deficit target, after the European Commission earlier this year concluded a previous excessive deficit procedure.
The tweaks to taxation for lump-sum pensions (kapitalpensioner) come on the heels of prior changes that allowed beneficiaries to lower their tax liability to the old-age savings vehicle (aldersopsparing).
Additionally, those with savings in Lønmodtagernes Dyrtidsfond (LD) will be allowed to withdraw their savings with a slightly increased tax rate of 2.7% – or to pay off the accrued tax liability in 2015 without withdrawing their savings from LD.
Forsikring & Pension (F&P), the Danish pension and insurance association, said the Treasury was taxing income at the expense of future treasury receipts.
Per Bremer Rasmussen, the association’s chief executive, said he accepted the government’s argument that the change was needed to sidestep a further excessive deficit procedure.
However, he said the move was at the expense of the welfare of future generations and urged the Finance Ministry to instead focus on measures that would bring about real growth.
He added that the money would be “missing from the Treasury when parents are in nursing homes”.