Instalment pension or life annuity?
Denmark’s two big pension types share one condition — payouts are taxed as personal income — but differ at the core: the ratepension pays out over an agreed span of years, the livrente for as long as you live. Choosing between them is about risk, tax and the state pension taper.
Ratepension: an agreed span of years
The ratepension pays out in equal instalments over 10–30 years of your choosing. You know the amount and the period, and anything left at death goes to your heirs. The trade-off: the money can run out while you are still alive — the period is fixed.
Livrente: for life
The livrente pays out for as long as you live — insurance against outliving your money. The price: payouts typically stop at death (unless a guarantee is attached), so as a rule nothing passes to heirs.
And the tax-free ones: aldersopsparing and kapitalpension
The aldersopsparing pays out tax-free — contributions carried no deduction — and it is not offset against the state pension supplement. The kapitalpension (closed to new contributions) pays out as a lump sum against a 40% duty.
Tax on payouts
| Type | Payout | Tax on payout | Offset against supplement? |
|---|---|---|---|
| Ratepension | 10–30 years | Personal income (no AM contribution) | Yes |
| Livrente | For life | Personal income (no AM contribution) | Yes |
| Aldersopsparing | Flexible / lump sum | Tax-free | No |
| Kapitalpension | Lump sum | 40% duty | No |
Personal income means the instalments stack on top of your other income: above the personal allowance of DKK 54,100 you pay bottom-bracket, municipal and any church tax, and large yearly payouts can reach the middle bracket (above DKK 641,200) and the top bracket (above DKK 777,900; 2026 thresholds). A shorter instalment period means larger yearly instalments — and a higher marginal tax.
The state pension taper
Running payouts from the ratepension and livrente count toward the income that tapers the state pension supplement — the aldersopsparing does not. That can make a krone from the ratepension worth less than a krone from free funds in exactly the years you receive the supplement. The mechanics are described in the guide on the state pension and offsetting.
What does the choice mean for the drawdown?
The ratepension’s free choice of period and start is one of the strongest levers in a drawdown plan: should it fill the years before the state pension, or be stretched thin all the way? Should the livrente carry the base of the budget for life while free funds take the peaks? The right answer depends on the household’s whole picture — both people’s tax, ages and other funds.
How NestEgg calculates it
NestEgg shows the ratepension, livrente, aldersopsparing, kapitalpension, ATP and state pension in one month-by-month plan — each type under its own tax rules, taper included. The optimiser tries periods and start dates and finds the highest monthly after-tax amount that lasts the whole way, without moving choices you have locked yourself.
See the answer for your own household
Import your PensionsInfo reports and NestEgg calculates when you can stop and what you can spend per month — Danish tax included, all the way.