Monday 31 May 2021 is the deadline for applying for payouts for the frozen holiday allowance. The vast majority have had their holiday allowance funds paid out, but there is also a large group who see the benefits of leaving their holiday allowance funds in their account as savings.
Naturally, there has been a strong focus on getting the Holiday Allowance paid out in order to help stimulate the Danish economy. However, from a number of enquiries we have received, it is clear that many people would like to save up if they can find a good way of doing so. Continuing to freeze your holiday pay is a good way to save up, if that is what you want to do. We can, in fact, offer a really good alternative to a bank account,
Up to 26 May 2021, requests had been made for the payouts of holiday allowance funds totalling just under 35 billion Danish kroner. Added to this is the 52 billion Danish kroner that was paid out last autumn. In total, 2.3 million employees have withdrawn DKK 87 billion, which, after tax, amounts to DKK 52 billion available for spending.
There is a financial benefit to leaving your holiday allowance funds untouched
There are other ways to save money than simply leaving it in a savings account, but the Employees' Holiday Allowance Fund offers low taxation on returns, which is a financial advantage. The fact that part of the holiday allowance funds is also held by employers provides further financial benefits. This is because the rate of return tracks wage growth, providing a secure foundation for your savings. At the same time, this return is paid into the fund as a tax-free return.
The average age of the group that chooses to leave their holiday pay in the scheme is high. Around a quarter of all employees aged 50–59 choose to leave their holiday allowance funds in their accounts, and almost half of employees over the age of 60 do the same. This suggests that, to a large extent, this is a group that is focused on their finances during retirement.
“It seems that it is, in particular, the older section of the population that sees an advantage in continuing to put money aside. Most likely because there are more people in this group who have enough financial breathing space to prioritise saving over spending at the moment. Holiday Allowance funds will grow over time whilst they are held with us. And we know from our Cost-of-Living Allowance funds that those who leave their money with us for the longest time are a group who use the freeze as a supplementary savings scheme – one they can, in effect, ‘thaw’ themselves whenever it suits them,” explains Dorrit Vanglo.
To date, the employees' holiday allowance funds have increased by 1.7 per cent. This is a net return after pension return tax and costs. If you choose to have your holiday allowance funds paid out so that you can keep them as disposable funds in the bank, you should be aware that interest rates at banks are very low and often negative. You can keep track of the returns on a regular basis in LD Pensions.
Age profile of Holiday Allowance funds
|
Age |
Holiday Allowance that have been paid out |
Holiday Allowance carried forward as a new age-based savings scheme |
|
0–29 years |
95% |
5% |
|
30–39 years |
88% |
12% |
|
40–49 years |
82% |
18% |
|
50–59 years |
75% |
25% |
|
60+ years |
56% |
44% |
|
All |
79% |
21% |
