The average Danish person pays around DKK 1m in tax on their pension returns over a lifetime, according to research published by Insurance and Pension Denmark (I&P Denmark).

Returns on Danish pension funds are subject to the PAL tax at a rate of 15.3 per cent, which is automatically deducted annually from pension savings.

I&P Denmark argued that, since the PAL tax is automatically deducted by the pension company, many people are unaware of the amount of tax paid.

The group said that the total PAL tax for a typical Dane could reach DKK 1m – though this depends on the returns, savings period and pension type.

It added that, typically, taxes could amount to around a quarter of pension assets at the time of retirement.

Commenting on the report, I&P Denmark CEO, Kent Damsgaard, said: “Most Danes see that they pay tax on their pension payments in the same way as other income.

"But they also pay tax on their return on pension savings every year – and this adds up to very large amounts over a lifetime.

"For example, for a schoolteacher, the tax can exceed DKK 1m.”

Damsgaard added: “When you look at the figures over a lifetime, it becomes clear that the PAL tax is very significant – but less talked about than many of the other taxes that Danes pay.”

Pension savings bring in billions for the Danish treasury; in January 2026, it was reported that the Danish government had raised DKK 44bn for the treasury in 2025.

I&P Denmark noted that calculations showed the PAL tax had raised DKK 652bn since 2000, partly due to strong investment returns.

The association stressed that there was a need for “greater debate about the PAL tax and the importance of it always paying off to save for retirement”.

Damsgaard concluded: “When discussing capital income, one should of course also discuss pension taxation in order to maintain a fair balance for all Danes.”

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