Danish social security benefits are paid to workers and residents who meet the applicable eligibility standards, including minimum length of coverage and minimum length of residency requirements. The Danish Social Pension system establishes differing length of residency requirements for Danish nationals than for foreign nationals. Under the Agreement, U.S. nationals, stateless persons, refugees, their family members and survivors will be able to qualify for Danish Social Pensions under the same, more favorable conditions that apply for Danish nationals, provided they have worked at least 12 months in Denmark.
DANISH SOCIAL SECURITY BENEFITS
The Danish social security system is a mixture of universal, means-tested and contributory programs. It includes a two-tier, compulsory pension program, as well as a third tier of voluntary programs.
The first tier of the Danish pension program, which is called the Folkepension in Danish and "Social Pension" in English, is a non‑contributory program that covers all residents of Denmark. Social Pension benefits are paid in flat-rate amounts that are prorated according to the number of years of Danish residence.
The second tier of the pension program includes two earnings-related programs known as the Labour Market Supplementary Pension (ATP) and the Special Pension Savings Scheme (SP). Enacted in 1964, the ATP is an employment-related pension program that covers all employees in Denmark between the ages of 16 and 65 who are permanently employed at least 9 hours per week. The SP was enacted in 1998, and is a compulsory program under which employees, the self‑employed, and some groups of Social Pension recipients (those receiving benefits due to illness, unemployment, or income support) pay 1 percent of their gross income for pension savings. The agreement only affects entitlement to Social Pension benefits.
This Agreement applies to retirement benefits paid under the universal residence‑based Social Pension program. Contributors to the employment-related ATP program are immediately vested and the ATP provides unrestricted payment of benefits worldwide.
Social Pension Program
Under the Social Pension program, Danish nationals who have resided in Denmark for at least 3 years between the ages of 15 and 65 are eligible for retirement benefits at age 65. The Social Pension retirement benefit consists of a flat-rate basic amount that is prorated according to the number of years of residence in Denmark. Individuals who have resided in Denmark for at least 40 years between the ages of 15 and 65 receive the full basic amount. Others receive 1/40 of the full amount for each year of residence in Denmark between those ages.
An ATP pension is payable at age 65 to anyone who has contributed to the program. The amount of the ATP benefit depends on the duration of time employed and the contributions paid. An ATP pension also may include a "bonus pension" based on the ATP fund's return on investment over the years. The ATP pension is calculated on the assumption that the ATP contributions earn an annual interest rate of 4.5 percent. However, the ATP’s average annual return on investments has been 11 percent since the beginning of the program in 1964, creating a sizeable surplus in the ATP pension fund, which results in the bonus pension.
Special Pension Scheme
The Special Pension Scheme is a compulsory program under which employees, the self‑employed, and some groups of Social Pension benefit recipients pay contributions for pension savings. In 1998, employees were required to make a temporary contribution of 1 percent of earnings to the Special Pension. In 1999, the 1-percent contribution became permanent. Contributors receive a monthly pension at age 65. Special Pension benefits, like ATP benefits, are payable abroad to both Danish and foreign nationals without restriction.
DISABILITY AND SURVIVORS BENEFITS
Social Pension Program
The Danish Social Pension system pays a benefit referred to as an "Anticipatory Pension" that plays the same role as disability and survivors pensions in most other countries. Anticipatory pension is payable to persons aged 18 to 65 whose capacity for work is materially reduced for physical, mental or social reasons (e.g., unemployment, divorce or the breadwinner in the family died) and the person is otherwise unable to assure his or her subsistence. Anticipatory pension is only awarded when all relevant possibilities for developing or using the individual's remaining capacity for work have been exhausted.
Danish nationals, foreigners with 10 years of residence between ages 18 and 65 (five of which were in the last 10 years), refugees, employees and self-employed persons from European Union (EU) member States may become eligible for the anticipatory pension.
Anticipatory pensions payable to the survivor of an insured person are means tested. If a spouse or member of a cohabiting couple dies and both were receiving a Social Pension benefit, the surviving partner remains entitled to the full amount of both partners' benefits for three months after the date of death.
Survivors may also apply to the Danish Ministry of the Interior and Health for a funeral benefit if, at the time of death, the pensioner was a resident of Denmark, an EU member State, Liechtenstein, or Switzerland. The funeral benefit amount is also means tested.
Disability benefits are not provided under the ATP program. However, a surviving spouse and children can become entitled to a lump-sum ATP survivors benefit upon the worker’s death, but only if the worker was born after 1936. If the member contributed to the ATP prior to January 1, 2002, the member's surviving spouse and children under the age of 18 can be entitled to an ATP lump-sum survivors benefit upon the member's death. The amount of the lump‑sum benefit depends upon the member's ATP contributions. If the member contributed to the ATP after January 1, 2002, the surviving spouse, common-law spouse and children under the age of 21 may qualify for a lump-sum benefit, provided the worker paid ATP contributions for at least two years. The lump-sum benefit is reduced if the worker dies between ages 66 and 70 and is not payable if the worker dies after age 70.