Your monthly return with the Holiday Allowance Fund consists of the return on the holiday allowance funds invested, as well as interest income on the holiday allowance funds that employers leave with their companies. The return on the funds held by employers follows wage trends and thus provides a secure foundation for the fund’s performance. Furthermore, the holiday allowance funds held by employers are guaranteed – even in the event of bankruptcy.
The return on the holiday allowance funds invested is subject to annual pension return tax, just as in other pension funds, whilst the interest income on holiday allowance funds held by employers is not taxed. The annual return is taxed at a lower rate than returns on unrestricted funds saved in a bank account.
We pay the pension investment tax to the government before any returns on your savings are credited to your account.
When your holiday savings are in the Employees' Holiday Allowance Fund, in most cases you have deferred your income tax until the date on which the pension sum is paid out. However, if you have already paid tax on your holiday allowance funds before they were frozen, you will not have to pay income tax on the payouts.
Offset against public benefits
Your savings can be paid out when you leave the Danish labour market – or later, if you choose to leave your savings in the scheme. Typically, when you receive pension payments, these may be offset against your state pension supplement. This is not the case when your savings are paid out by the employees' holiday allowance fund or when other lump-sum payments are made. However, you should be aware that both your holiday allowance funds and other lump-sum payments may be offset against other state benefits you receive.
If you have left the labour market to take early retirement, the payouts for your accrued holiday allowance funds will not be deducted from your early retirement pension.
There are special rules regarding offset if you choose to take early retirement. Unlike with other pension schemes, your savings with the employees' holiday allowance fund will not affect the calculation of your early retirement benefit rate. However, your Holiday Allowance funds will be offset if you choose to have them paid out whilst you are on early retirement. If you choose to wait until after you have been on early retirement to have your Holiday Allowance funds paid out, no offset will take place.
Once you have chosen to have your accrued holiday allowance funds paid out by The Holiday Allowance Fund, it is not possible to distinguish the paid-out holiday allowance funds from other assets in your statement of assets. You will therefore have these holiday allowance funds deducted from your means-tested state benefits if your paid-out holiday allowance funds are included in your assets.
