LD Pensions (LD Fonde), the manager of the Danish holiday allowances fund set up three years ago, said it has now paid out DKK50bn (€6.7bn) as part of a government coronavirus measure to boost consumption – but said 600,000 people are considering leaving their money in the fund instead.
The money withdrawn so far is half of the DKK100bn that LD Pensions had originally been tasked with managing in the holiday fund (LD Feriemidler) on behalf of Danish employees until their retirement.
Back in June, after Danish politicians agreed to disburse three of the five weeks of holiday allowances held in the fund, as part of a stimulus package to help the country recover from the COVID-19 economic slump, LD Pensions was already expecting to pay back up to 60% of the holiday fund early.
But it was uncertain how many people would in fact opt to take the money out, and how many would decide instead to leave it to develop until retirement.
LD Pensions announced yesterday that almost 2.2 mllion employees had chosen to request payment of their holiday funds since 29 September when the process opened, and that by the middle of November – with two weeks until the deadline – it had paid out almost DKK50bn.
“Just over 600,000 employees have an eye on the alternative to payment and consumption, which is to save the money,” the Frederiksberg-based management firm said.
The firm also said it was particularly people over 40 who were deciding to leave their holiday allowances in the fund. The tendency was that the older people were, the less likely they were to apply for the cash, LD Pensions said.
“For them, retirement from the labour market is not that far away, and perhaps they may see a need to have more funds available in the first few years after retirement,” LD Pensions said, but added that another factor behind the trend could be the higher numbers of top-rate taxpayers in the older age groups.
“If your annual income, including the holiday funds paid out, exceeds the limit for top tax, you have to pay top tax on the part of the income that exceeds the limit,” LD Pensions said.
According to ATP, which administers the holiday fund, a million Danes still have the option to apply for three-fifths of their frozen holiday pay by the 1 December deadline.
Minister for Employment Peter Hummelgaard encouraged people to take the money out and spend it.
“It is not up to the government to decide whether people have their frozen holiday pay paid out or what they want to use their money for,” he was quoted as saying in ATP’s announcement.
“But in order for us to succeed in preserving Danish jobs during the coronavirus crisis, it is crucial that a lot of money goes into circulation,” he said.
LD Feriemidler was created as a result of a change in Denmark’s holiday law for employees, which brought the country into line with EU rules on workers’ vacation entitlements.