Statutory Old Age Pension Scheme

Mandatory insurance

• Every resident in Sweden is insured for residence-based benefits. Habitual residence is defined as having intended residence for more than 12 months. The guarantee pension is residence-based.
• Individuals working in Sweden and individuals employed by the Swedish state and posted in another country are insured for work-based benefits. The income and premium pensions are work-based.

General finances

• The guarantee pension is entirely tax-financed out of the general budget.
• The income pension is mainly PAYG-financed from employer contributions. The scheme operates under a PAYG-financed notional defined contribution system based on insurance contributions and property investments. The self-employed pay an equivalent contribution.
• The premium pension is a premium reserve system, funded from employer contributions and capital revenues.

Contribution rates

• Contributions are formally shared between the employer and the employee.
• The contribution rate for employers is a fixed share of the monthly payroll (10.21%); without contribution assessment ceiling; the self-employed pay this contribution as a fixed share (10.21%) on their net business income.
• Employees and also self-employed persons pay a ‘general pension contribution’ on a fixed share of income (7%), with contribution assessment ceiling (approximately SEK 550,000 annually).

Taxation of contribution payments

• The ‘general pension contribution’ of employees and the self-employed is fully compensated by tax reduction.

• The ‘Pension Agency’ (Pensionsmyndigheten) administers the public pension scheme.

Qualifying conditions

Income pension and premium pension

• Retirement is flexible from age 62. The so-called target age (riktålder) will increase to 64 in 2026 and be indexed to life expectancy.

Guarantee pension

• Retirement age is 65 but will increase to 67 in 2026.
• Three years of residence in Sweden (between age 16 and 65); 40 years’ residence in Sweden required for receiving a full guarantee pension.
• Benefit is pension-tested: only paid to persons with a pension below the mini-
  mum pension level (2,181 ‘price base amounts’ / SEK 103,812 for unmarried persons; 1,951 ‘price base amounts’ / SEK 92,868 for married persons).

Early retirement

• No options for early retirement available before the age of 62.

Deferred retirement

• Retirement age is flexible, and pensions can be accessed from the age of 62.
• Individuals who stay at work will continue to earn pension rights and thus increase their pension based on the principle of actuarial neutrality.

Combining employment & retirement

• Termination of employment is not a precondition for claiming pension benefits.
• It is possible to work at the same time as receiving a pension.
• Old age pension can be drawn at levels of 25, 50, 75 and 100%.

Pension benefits

Income pension and premium pension

• Pension rights are based on the amount of contributory earnings throughout working career, including pension-credited periods of e.g. child-caring, studies at university with student grants, earnings related to invalidity insurance, military service.
• Maximum amount: pension rights are annually calculated based on 18.5% of the ‘pensionable income’. The pensionable income is subject to a ceiling of 7.5 times the ‘income base amount’ yearly (the income base amount is SEK 66,800 in 2020).
• Minimum amount: an income pension supplement is paid to persons that worked for many years with a low salary and have a taxable income pension between SEK 9,000 and SEK 17,000. The supplement ranges from SEK 0 to 600.

Guarantee pension

• The guarantee pension is a pension-tested, flat-rate benefit (as determined by statutory minimum pension level) with insufficient levels of income-related pension benefits.

Benefit calculation

Income pension and premium pension

• Pension rights are annually calculated based on 18.5% of the ‘pensionable income’; 16% of pensionable income is allocated to the income pension and 2.5% to the premium pension; incomes below 42.3% of the ‘income base amount’ do not generate pension rights.
• Accrued pension rights for income pension are recalculated annually with reference to a balance index aiming to secure the financial sustainability of the income pension. The index considers lifetime earnings, age of retirement, life expectancy of relevant cohort and development of the incomes of the system. Downward adjustment is possible.
• The premium pension applies a conventional insurance principle with the granting of a life annuity. The pensioner can choose between placing the capital in an insurance with guaranteed yearly payments or keep it in the chosen fund. If the latter is chosen, the capital is recalculated annually.

Guarantee pension

• The full flat-rate guarantee pension (SEK 103,812 for singles and SEK 92,868 for married persons) is paid to those with 40 years of residence in Sweden; proportionate shortening for shorter residence periods.

Taxation and social security contributions

• Pension benefits are subject to income tax (incl. financing of health insurance).