Pensions from different sources
The Swedish pension system – how it works
Have you seen the pension pyramid before? It shows that the Swedish pension system consists of three parts: The public pension from the state is at the bottom. For most people an occupational pension from their employer makes up the next layer. Any private pension savings people may choose to make go at the very top.
This shows that your pension comes from different sources. You may choose where to invest your pension savings yourself for certain parts, but not for others. We’re now going to go through the three parts and tell you everything you need to know and do. Join us!
Public pension – the national pension from the state
If you work and pay tax in Sweden, money is allocated to your public pension. This is paid for by your employer through employer contributions, and you also pay some via your taxes.
You accrue public pension on income up to a threshold of SEK 44,375 per month (equivalent to 7.5 income base amounts*).
*Base amounts, like income base amount and price base amount, are used for a range of calculations, for example for pensions or insurance. The amount reflects price and income trends in Sweden and is set every year.
Public pension includes:
- Income pension – 16 per cent of your salary is allocated to the income pension every year. This money goes to the people who are retired today. Your income pension will in turn be paid for by those who are working and earning money when you are retired.
- Premium pension – 2.5 per cent of your salary is allocated to the premium pension every year. This money goes towards your own future pension. You can choose where to invest this money yourself. This is done through the Swedish Pensions Agency (Pensionsmyndigheten).
- Guarantee pension – if you have had little or no income during your life, you may receive a guarantee pension. This is based on various things including how much income pension you are entitled to and how long you have lived in Sweden.
You will continue to accrue public pension while you are studying or on parental leave.
A total of 18.5 per cent of your income (maximum pensionable income is SEK 44,375/month) is allocated to the public pension every year. The size of your pension depends on how many years you have worked and the amount you earned.
Each year, the Swedish Pensions Agency sends you an annual statement of your public pension. You can also see how much you have accrued to date and get an estimation of how much pension you will receive on minpension.se External link..
- Your public pension is calculated from your pensionable income. the Swedish Tax Agency (Skatteverket) decides what your pensionable income is each year, based on the information on your declaration of income.
- Your public pension is administered and paid out by the the Swedish Pensions Agency External link..
- If you wish, you can choose which funds you want your premium pension to be invested in. If you don’t make a choice, the premiums will be invested in the default state fund AP7 Såfa. Make a choice on the Swedish Pensions Agency's website External link..
- If you stop working in Sweden or move away from Sweden, you stop accruing a public pension. The pension you have already accrued (income and premium pension) remains unchanged and can be drawn as soon as you reach 62 years of age.
- To accrue a public pension, you need to be working and paying tax in Sweden.
- Make sure you also have an occupational pension – your public pension isn't all you are entitled to.
- When you would like to begin drawing your public pension (from age 62 at the earliest), you will need to complete an application for the Swedish Pensions Agency External link.. Submit your application three months before you would like to receive the first payment, or six months before if you no longer live in Sweden. You can draw your pension whether you live in Sweden or in another country.
- If you move away from Sweden, you need to send a Life Certificate every year to keep receiving your pension. Read more about pensions when you live outside Sweden External link..
Occupational pension – the pension from your employer
Your occupational pension supplements the public pension. If you work for a company that has a collective agreement, an occupational pension is included automatically. But even if your workplace doesn't have a collective agreement, you may still be entitled to an occupational pension, provided that your employer has taken out another occupational pension solution.
If you have worked in areas other than the private sector, such as for the government or a municipality, you may also receive an occupational pension from that employment.
Your occupational pension makes up an important part of your total pension.
You can read more about what collective agreements are in the section titled ‘The ITP occupational pension’.
The amount of your occupational pension depends on factors such as which occupational pension solution your employer has, how many years you have worked and the amount you earned. The higher your salary, the greater the proportion of your total pension will be made up of your occupational pension. At least, provided it’s part of a collective agreement. That’s because collectively agreed occupational pensions are designed to supplement the public pension.
The public pension has an income threshold of SEK 44,375 per month in salary. You don’t accrue any public pension on the portion of your salary that is above this threshold. Instead, your occupational pension is higher above the threshold, which means that you accrue more occupational pension on the portion of your salary that is above the threshold.
- Different sectors have different collectively agreed occupational pensions. The ITP is the collectively agreed occupational pension for salaried employees in the private sector.
- If you do not choose where to invest your collectively agreed occupational pension, the premiums are invested in a selected default option.
- If you have had several different jobs for various employers, your occupational pension is probably invested in multiple insurance companies. Each year, you will receive an annual statement from the selection centre or centres that administer your occupational pension.
- If you stop working for a Swedish company where you have an occupational pension, you stop earning occupational pension premiums too. The occupational pension you have already accrued remains unchanged, and you cannot transfer the money to another country. When you start drawing your pension (from age 55 at the earliest if you have the ITP occupational pension), you will be able to get the money paid out in the country where you live.
- Ensure that you have an occupational pension at work. If your workplace does not offer an occupational pension solution, negotiate an occupational pension with your employer.
- Collectively agreed occupational pensions include optional cover so your family can receive compensation if you die. Think about whether you would like to choose any additional cover. You do this through your selection centre. Collectum is the selection centre for the ITP pension.
- If you wish, you can choose where to invest your collectively agreed occupational pension. You do this through your selection centre. You don’t have to make a selection yourself if you don’t want to, though.
- When you want to begin drawing your occupational pension (from age 55 at the earliest for the ITP), you need to contact the insurance company that manages your pension savings. You can draw your pension whether you live in Sweden or in another country.
Private pension savings – money you save yourself
Anyone who wishes to can also save money themselves towards their pension. It is up to you to decide whether you would like to contribute to your own pension savings.
This depends on how much money you save, and for how long. It also depends on the value development of your savings and what fees you pay.
Having an occupational pension has more of an impact on your total pension than private savings. If you don’t have an occupational pension, you will probably need your own savings.
- If you don't have an occupational pension, you need to save 4.5 to 5 per cent of your monthly salary up to about SEK 40,000 per month to match what an employee included in a collective agreement gets paid into his or her occupational pension. If your salary is higher than that, you need to save even more for the provision to correspond to a collectively agreed occupational pension.
- Watch out for funds with high fees. Over time, high fees will chip away at your capital more than you might think.