Basic pension or guaranteed minimum pension to elderly people

The basic pension in Denmark, the Faroe Islands and Norway (where it is called the guaranteed minimum pension) consists of a basic amount and a supplement.

Basic and income related pension schemes

Though the regulations of basic pension schemes are often similar in the Nordic countries with respect to age and citizenship, the rules vary considerably in terms of the relationship between the employment pension/earnings-related pension and the total payment of pensions.

In the Nordic countries, in order to qualify for an employment pension/earnings-related pension, the insured person must have been in employment.


The basic amount paid to all pension recipients is adjusted in relation to any income they receive from work. The ordinary pension supplement, in addition to the basic pension, is adjusted in relation to a pensioner’s own and any spouse’s total income. Health and heating allowances, as well as a personal supplement, may also be paid to pensioners with low incomes and high expenses. Pensioners with low incomes and a small amount of disposable capital may be awarded a supplementary pension allowance (known as the pensioner’s cheque), which is payable once a year in January.

Earnings-related pension

Due to the design of the old-age pension schemes, the earnings-related pension only represents a small part of the total payment.

Faroe Islands

The basic amount is not income-adjusted. The regular pension supplement is adjusted in relation to taxable income. Pensioners with no or a low income may be awarded an annual non-taxable supplement.

Earnings-related pension

Though part of the old age pension is related to earnings, all old-age pensioners receive the same payable amount from the labour-market pension scheme, as it is designed as a solidary pension-scheme. Therefore, it is often considered as a basic pension, though it does not rely on identical regulations.


The basic pension, which is based solely on an earnings-related pension, has played a less substantial role since the reforms of 1996–2001. Following the Act on Guaranteed Pension, which entered into force on 1 March 2011, the guaranteed pension was only payable to those whose total other gross income from pensions was less than EUR 828 per month in 2020. The maximum guaranteed pension in 2020 was EUR 835 per month. Any other pensions received, either from Finland or abroad, affect the amount of the guaranteed pension, and are deducted at a rate of 100 per cent.

Earnings-related pension

Earnings-related pensions are insurance-based and cover all employees and self-employed individuals, with no income ceiling. As of 2005, the pension has been calculated on the basis of total earnings during the period in which the individual was in work between the ages of 18 and 68.

The pension is financed through contributions from both employees and employers.


The basic pension is adjusted according to special rules in relation to other taxable work-related income. An additional pension is also available, depending on the recipient’s other income. In addition, a household supplement may be granted depending on income and household status. Pensioners with little or no other income may be eligible for supplementary special pension, which is payable to those whose total gross income is under a certain amount. In 2016, this amount was ISK 246 902 per month for those who live alone, and ISK 212 776 per month for those who cohabit.

Employment pension

The employment pension funds have paid out more than the amount paid in basic pension by the public authorities, and as such are an increasingly important part of the pension scheme.


The guaranteed minimum pension consists of a minimum pension level, which is fixed at several different rates depending on marital status and the income of any spouse/cohabiting partner. If the pensioner has no or only a limited supplementary pension, a pension supplement is payable. The pension supplement corresponds to the difference between the minimum pension and the basic and employment pension. Under the new pension’s accrual system, the basic pension, employment pension and pension supplement are replaced by a guaranteed pension, i.e. a guaranteed minimum benefit. To qualify for a full pension, the recipient must have been resident in the country for 40 years between the ages of 16 and 66. Years of residence between the ages of 67 and 75 may also be counted if pension points were accrued.

Employment pension

The employment pension is part of the security provided by the National Social Insurance Scheme and is calculated in relation to previous income. Under the new accrual system, the income pension replaces the previous supplementary pension system. The proportion of the accrued income pension has been reduced in relation to the guaranteed pension (80 per cent).


The guaranteed minimum pension is payable to those who do not qualify for an employment pension, or as a supplement to a low employment pension.

Earnings-related pension

Income pensions consists of three parts. Old-age pension, sickness benefit and benefits for surviving relatives. The amount of the income pension depends on what a person have been working with, for how long and the salary.