Is there a better way to do pensions?

Len details how the Danes handle pension payments and asks whether Australia should do the same.


Q. Len
I read with interest (dismay!) your article on superannuation versus pensions. My wife and I are fully dependant on the pension, as whatever superannuation we had was used to purchase/build our retirement home here in the NT. We have both arrived in Australia from overseas, my wife from the UK (1976) and me from Denmark (1963).

When my wife retired, she approached the social services in the UK and was told that although she was entitled to a UK pension, it amounted to less than a dollar a month! So, they gave her a princely one-off payment of $150. Big deal.

When I retired in 2013, Centrelink asked me to ascertain if I was entitled to a pension from Denmark. While visiting the country I attempted to contact their social security department, but it was too difficult as this department has been devolved to several provincial towns. This works very efficiently, due to a high speed and secure internet system. When I returned to Australia, I contacted the local Centrelink department and told them of the difficulties I had experienced, asking if they could please contact their counterparts in Denmark. That ended up with me receiving a peculiar letter from Centrelink stating: “As I had not resided in Denmark before my 15th birthday, I was not entitled to a Danish pension.” Go figure! I emigrated at age 23.

A couple of years later, while talking to my daughter who lives in Canberra, she told me that my Danish ex-wife, who had just taken up residence with her, was receiving a pension from Denmark. WHAT? How come? I got some details from her and contacted the relevant department in Denmark by telephone. Knowing how long it takes for Centrelink to answer a phone call, I expected to be put on hold. I was shocked when the phone was answered promptly, and as I still talk the lingo, the lady at the other end soon found me on their computer system and, yes, of course, I was entitled to a pension, the amount depending on the time I had earned an income in Denmark.

Subsequent telephone calls to various departments in Denmark were usually answered immediately or within a few minutes.

Then began the exchange of letters and forms. Such correspondence could not be done by email unless I had an NEM account, and I had to jump through hoops to obtain one, even to find out! To simplify matters, all residents of Denmark are given a CPR (Citizen Personal Registration) number at birth; the number is your date of birth followed by a serial number, even numbers for females and odd for males! Simple.

I had to satisfy the department that I had indeed earned a living and paid taxes in Denmark, so I was asked to supply copies of work contracts, pay slips, etc. Who keeps such papers for 56 years and moving umpteen times? Statutory declarations solved a lot of problems. It all got sorted after a few years. The Danish social security department would backdate payment from the date I applied, and when I told them about the ‘stuff-up’ with Centrelink here, they backdated the payments to April 2013.

I am now in receipt of a Danish old age pension, to which all citizens are entitled regardless of where you live, or of income. It is simply part of your daily/weekly/monthly income and you pay tax on your combined income. In my case, my pension is 6/40ths (40 years is considered a working life) of a full pension, so I receive each month about $206, clear of a tax deduction of 37 per cent. I got a pleasant surprise last June when the Danish tax department advised me that I had a refund coming. Wow!

One curiosity is that each year in June I have to fill out a ‘living certificate’ to prove that I’m still breathing. Another curiosity is that my wife has now also been given a Danish CPR number – just to keep their computers happy.

In Denmark, pensions are considered income on which you pay tax, there are no ‘freebies’. If you decide to continue working after retirement age, the pension is added onto your taxable income. You are not treated as a second-class citizen, relying on ‘welfare’. A pension is never welfare, it is a right that all working Australians are entitled to and have worked for. Set the Australian pension to whatever is deemed sufficient, and let folks decide for themselves what they want to do when they reach their retirement age. If you have superannuation, or whatever, it’s yours and should not affect your entitlements from the Commonwealth. What do you think?

A. It sounds like a very fair system to us and one that quite a few countries use to determine their pension payments. We would be interested to hear what else the YourLifeChoices community thinks about adapting the Danish retirement income system in Australia. Over to you folks, what do you think of Len’s idea?

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Written by Ben Hocking

Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.

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