Group of European Pensioners from Savings Banks and Financial Institutions


Index of documents > Reports and communications > Salou '04

Dear friends in the Group!


To get all statements that I could about the new pension system in Sweden I have contacted the two big authorities, National Social Insurance Board (RFV) and Premium Pension Authority (PPM). I have also received a lot of material from the swedish pension expert, KG Scherman, who is a former DG for RFV in Sweden and now is a member of the pension policy group in AGE. I will insert some commentaries from him (AGE) when I come to the end of my report.


First I must give some basic commentaries from a comprehensive point of view:


In the new pension system in Sweden is the demand for work and income to have a good pension fundamental higher than in the old system. A person of 30 age today can count upon a pension corresponding somewhere between 40 to 45 percent of his final salary from the age of 65. To this will come the occupational pension who will give about 10 percent.


In the new pension system will the greater part of the paid income related pension be converted into that so called consistency index. That means that the add up will be done corresponding to compensation development minus 1,6 percent.  Already in the shape of the rules it is provided that pensions when they once is appropriated not will follow compensations.     


The automatic balance is a mechanism which beyond all other restrictive elements in the new pension system emerge in function if income will not be enough. If state finance will be in unbalance this mechanism will come in function and reduce pensions so much that needs to restore the finance balance.   


The new national (public) pension system


Sweden has a new national (public) pension system from 1999 and the first pensions from the new system were paid 2001.


Income-, premium- and guaranteed pension

The national pension consist of income pension, premium pension and - for those with a low income or no income - guaranteed pension. Together they compensate the earlier old-age  pension system  and ATP-system.


Whole life is counted

The public pension depends amongst other things on how much you earn during the time you live in Sweden. It means that in principle all what you earn and pay taxes for give pension. But you only got pension for yearly income up to a certain ceiling. The income ceiling is 7,5 base amounts per year, which means about Euro34.500 in 2004.


Beyond real income even so called fictitious income give pension rights. They are called pension qualifying income. Pension qualifying income you can receive for year with small children (so called childcare years), currently retired, doing national service and for higher studies.


16 percent  plus 2,5 percent

18,5 percent of your pension qualifying income and also other income (for instance unemployment relief and sick pay) up to that income ceiling are reserved to an pension charge who finance the pensions. 16 percent go to income pension and 2,5 percent  to premium pension. Guaranteed pensions are financed with taxes.  .          


Income pension

Income pension is a distribution system as ATP was, meaning that the charges who comes in direct are forwarded as pension to those who are pensioners today. In a equivalent way will your pension be paid from those who works when you are pensioner.


16 percent of your pension qualifying income and other tax duty compensations go to the income pension. Your pension rights for the income pension are added year after year and become, after enumeration with the common wage development in society, your right to income pension when you become pensioner.


Premium pension

2,5 percent from your pension qualifying income and other tax duty compensations go to the premium pension. You who are born before 1954 become a lower percentage. These money who are reserved for premium pension are not paid to the today pensioners but are saved to be paid to you when you become a pensioner.


The money are invested in share- or rate funds which you can chose up to five yourself among about 600 who are available and the value growth then decide how great your premium pension will be. You are allowed to change funds without any costs. You may also transfer your premium pension rights to your husband /wife, but the balance transferred  will be reduced by 14 percent.


Guarantee pension

Guarantee pension is a basic security pension. For anyone whose lifetime earnings have been low, or who has had no earnings at all. It guarantee that nobody become a lower pension than Euro 675 per month if you are married and Euro 760 if you are alone. It can at some events completes with a housing supplement.


Guarantee pension can be used at 65 years age. You must have lived at least three years in Sweden to apply for it and to receive a full guarantee pension  it demands that you have lived from your 25th birthday until your 65th birthday. For certain other groups, such as refugees entitled to protection, special rules apply.


Guarantee pension are financed with taxes.


Whom are included to the public pension?

Different groups of age are included in a different way of  the public pension.


1937 or earlier

You who are born 1937 or earlier are not included to the public pension system. You got your fully pension from the old ATP-system.


1938 to 1953

You who are born the year 1938-1953 got your pension both from the old and the new pension system. How great part you become from the respectively systems depends on which year you are born.


For instance will that one who is born 1938 become 4/20 of his pension from the new system and 16/20 from the old system. That one who is born 1939 become 5/20 from the new and 15/20 from the old system.   


According to that so called guarantee rule you are guaranteed at least the same pension which you have earned in to the ATP-system until 1994.


From 1995 your income give you right even to premium pension.


1954 or later

Are you born 1954 or later you are fully included in the new pension system. All the ATP-points you have earned are recounted to pension rights for the income pension. Your income from 1995 give you also right to premium pension.  



Final remarks

I´m aware of that this report are in the shortest manner but I prefer to give it to you that way instead of making a very long and comprehensive one as I myself is not an expert. The opinion about the new pension system is very different depending upon whom you ask. Our politicians like it, the people don´t know very much about it (it was negotiated in the so called “small rooms” in our parliament) and the organisations for pensioners hav´nt protested too much. The system are what we can afford in future from our politicians point of view.


A lot of representatives from the European  governments had visited Sweden in order to learn more about our system and how our politicians behaved to prize it through the parliament and have it accepted by all parties.


The pension policy group in AGE have set up some common directive rules and policies  and also sent over a report to the EU-top meeting in March 2003, what is fundamental  in the coming reform activities. They have also a lot of point of views related to the new Swedish system.   


Future may show us how other countries in Europe will act in order to reform their systems. A lot of the countries are just now working very hard with these matters and are right in the thick of there efforts .Big countries as Germany and France have already meet a lot of opposition  and have “a long way to go” before they can come through.


A lot of experts agreed about the necessities to work longer time each week and create growth in society. Without that coming generation (children and grand children) will have a very difficult future. What are we leaving to them?


Wilhelm Lemchen

Sweden  v. president  in the Group