Since 29 September 2020, just under 2.2 million employees have chosen to visit borger.dk and apply to have their holiday allowance paid out. LD Pensions, which manages the holiday allowance funds, had paid out just under 50 billion Danish kroner by mid-November.
Just over 600,000 employees are considering an alternative to payouts for their holiday pay, namely saving the money. If you choose to leave your holiday allowance funds in the scheme, they will be combined with the remaining two weeks’ frozen holiday allowance to form an additional pension savings pot, which you can have paid out when you leave the labour market. Until then, they will earn interest in the Holiday Allowance Fund, which is managed by LD Pensions.
We expect to be able to generate a stable return on the holiday allowance funds, similar to that achieved on the Cost-of-Living Allowance funds. There will be fluctuations in the return, but over time the savings are expected to grow faster than prices and wages in society. Holiday Allowance funds can therefore be seen as a supplement to one’s other pension, characterised by being a sum that one can dispose of at one’s own discretion once one has reached retirement age. Saving is a sensible alternative to taking the money now, if you do not have an immediate need for the funds.
People over the age of 40 are more likely to leave their money where it is
The older you are, the less likely you are to have your holiday allowance funds paid out. It is particularly employees aged 40 and over, right up to retirement age, who leave their holiday allowance funds in their accounts. For them, retirement is not far off, and they may see a need to have more funds available in the first few years after retirement. It may also be a factor that there are more top-bracket taxpayers in the older age groups.
If your annual income, including the holiday allowance funds, exceeds the top-rate tax threshold, you must pay top-rate tax on the portion of your income that exceeds the threshold. In 2020, the threshold is DKK 531,000, after deduction of social security contributions. If you wait to have your holiday allowance funds paid out until you leave the labour market, the tax situation may have changed, meaning that you will no longer have to pay top-rate tax on the payouts.
It is 20–35-year-olds who make up the largest proportion of employees who have requested payment of their holiday allowance, up to three weeks’ worth.
Payouts up to 1 December 2020
If you wish to have your frozen holiday allowance – up to three weeks’ worth – paid out, there is still time to do so. You simply need to submit a request for payouts via the self-service portal on borger.dk by 1 December 2020 at the latest. The holiday allowance funds will then be transferred to your NemKonto.
