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Mandatory occupational pension fund

The Pension Act No. 129/1997 provides for a mandatory affiliation to the pension fund provided for in the applicable collective agreement, for all workers between the ages of 16 and 70. The membership of a workers’ pension fund is determined by the collective agreement on which the basic wages for each worker are determined.

The minimum contribution is 12%, of which 4% are deducted from the worker’s wages and 8% which is added by the employer. 

The contribution base is comprised of all types of wages or compensation for work which is subject to income tax.  The contribution base shall not, however, include benefits paid in kind, such as clothing, food or accommodation, or payments which are intended to cover expenses paid, e.g. vehicle allowances, per diem and food allowances. 

The workers 4% contribution is deducted from his income before taxes are levied. The tax liability is postponed in the sense that the pension benefits are taxed as income from employment when they are eventually paid out.