Chapter VI: Old-age Chapter VI: Old-age
Applicable statutory basisLaw of 1962 on General Social Security and amendments.
Law of 1998 on Earnings related Old Age Pension.
Law of 1979 on Partial pension.
Basic principlesThe first pensions from the new scheme will be paid in January 2001. There will be transitional rules as the new system is introduced only gradually. The first year in which a new pension will be calculated completely under the new system is in 2015.
The public old age pension system (ålderspension) is compulsory and of universal coverage. Pension rights can be earned from the age of 16, there is no upper age-limit.
The old age pension system consists of three parts:
The PAYG earnings related old age pension (inkomstgrunded ålderspension) is a system with fixed contributions of 16% of the pensionable earnings, earnings up to and including 7.5 base amounts (basbelopp).
Fully funded premium reserve system (premierservsystem) based on conventional insurance principles forms a second part of the earnings related scheme. 2.5% of the pensionable earnings will be paid into this system and will carry return in individual accounts.
Guarantee pension (garantipension) for all residents with low or none earnings related old age pension.
Field of applicationCompulsory coverage for all residents in Sweden from the age of 16. There is a flexible pensionable age from the age of 61.
Exemptions from compulsory insuranceEarnings less than SEK 1,000 (EUR 106) yearly are not pension-carrying in the earnings related old age pension system. Earnings exceeding 7.5 base amounts (basbelopp) are not qualifying for pension nor are they subject for contributions.
ConditionsNone for the earnings related old age pension.
Three years of residence in Sweden for the Guarantee pension.
Old age earnings related pension could be drawn from the age of 61. The pension will be based on all life-time earnings reported to the scheme from the age of 16. There is no upper limit. A "full" pension does not exist in this scheme.
Guaranteed pension could be paid out from the age of 65. For a full pension there must be 40 years of residence in Sweden. The maximum total is 2.13 base amounts (basbelopp). The guaranteed pension will be reduced in relation to the earnings related pension the individual is entitled to. Above an earnings related pension of three base amounts no guarantee pension is left.
Standard pension
Flexible from the age of 61. Pensions are actually adjusted with respect to the age at retirement.
Early pension
No special early pension. See above.
Deferred pension
There is no upper age limit. Pension rights could be accrued as long as a person has pensionable earnings.
BenefitsEarnings related PAYG pension:
The pension will be based on all life-time earnings reported to the scheme from the age of 16. There is no upper age limit.
Age of retirement.
Life expectancy for a cohort.
Development of the economy.
Fully funded, premium reserve pension:
Ordinary insurance principles.
Guaranteed pension:
For a full pension there must be 40 years of residence in Sweden. The maximum total is 2.13 base amounts (basbelopp). The guaranteed pension will be reduced in relation to earnings related pensions. (see further factors above).
In the PAYG old age earnings related system pension rights accrued are indexed yearly. The applicable index is based on the development of average wages reported to the pension system. Disability pensions are also included.
An annuity factor will be used in the pension formula. Outgoing pensions, will be calculated by dividing total accrued pension assets by this factor. The factor will depend on average life expectancy for a cohort, on the age of retirement for an individual and on a "norm" for (expected) increase of average wages.
Life expectancy tables will be based on the most recent average life expectancy statistics over a five year period.
The "norm" for increase in average wages is 1.6%. It is used in the index for the yearly adjustment of outgoing pensions as well as in the factor for calculating the first year's pension. The annuity factor works as follows: Once the first year's pension is established, it is indexed according to the increase in average wages reduced by the norm. The annuity factor for computation of the first years pension is affected by the norm in such a way that the present value of the pension payments to a person living as long as the life expectancy for the cohort, is the same as if the first year's pension had been calculated without the norm (it would then have been substantially lower than under the rules now enacted) and a straight wage indexation had been used.
In the fully funded premium reserve scheme conventional insurance principles are applied. Only life annuities are granted.
See above.
child care years in the case of parents of small children,
national service or equivalent,
qualifying earnings in the case of recipients of disability pensions,
Social security benefits.
For some of these periods the individual pays a contribution; the State pays always what remains up to 18.5%.
Spouse
According to transitional rules: Wife's supplement (hustrutillägg) is payable to women born before 1934. This supplement is awarded to a basic pension (folkpension) according to a legislation that ceased in January 1995.
Children
Children's supplement (barntillägg) is payable to persons who were entitled to the benefit in December 1989. It is payable for every child under 16 years. The supplement is paid to basic pension (folkpension) only.
Pension supplement (pensionstillskott): This supplement is payable to persons who receive low or no supplementary pension (allmän tilläggspension, ATP) at all. The maximum supplement to an old age pension is 55,5% of the base amount (basbelopp).
Housing supplement (bostadstillägg) for pensioners: 85% of the housing costs between SEK 100 (EUR 11) and SEK 4,000 (EUR 422). The supplement is income-tested.
No special scheme. The minimum pension (basic pension, folkpension, plus pension supplement, pensionstillskott) is replaced by a guarantee pension from the year 2001.
Basic pension (folkpension): maximum (full period of residence or work), yearly amounts:
Single pensioner: SEK 34,944 (EUR 3,690);
married each: SEK 28,574 (EUR 3,017);
Supplement maximum: SEK 20,202 (EUR 2,133).
Supplementary pension (allmän tilläggspension, ATP):
Maximum of SEK 141,960 (EUR 14,991) per year.
New legislation will be in force from January 1st 2001.
The pension is permanently decreased with 0,5% of the old age pension per calendar month before the age of 65.
A different calculation will be in force from January 1st 2001.
The pension is permanently increased with 0,7% of the old age pension per calendar month after the age of 65.
A different calculation will be in force from January 1st 2001.
AdjustmentThe rate of adjustment is fixed every year on the basis of the evolution of prices (base amount, basbelopp).
Supplementary pensions (allmän tilläggspension, ATP) are adjusted according to changes in the base amount.
Partial pensionPart time pension (delpension) according to the Law on Part-time pension may be drawn between ages of 61 and 64.
The insured must reduce his working hours under certain conditions. After the reduction of working hours, the partial pensioner must work between a minimum of 17 and a maximum of 35 hours per week on average.
Payments are made for a reduction of a maximum of ten hours per week.
The loss of income is reimbursed at 55% payment. The partial pension only compensates for loss of income up to 7.5 base amounts (basbelopp).
Accumulation with earningsAccumulation possible since earnings do not effect pension entitlement.
Taxation and social contributionsPensions are fully liable to taxation except housing supplement (bostadstillägg), handicap allowance (handikappersättning) and care allowance (vårdbidrag) to the extent it covers special costs.
Pensions below a certain limit are subject to special deductions. This means that a pensioner with only a basic pension (folkpension) and pension supplement (pensionstillskott) is not liable to taxation. For pensioners with higher pensions the special deduction is deescalated with 65% of the income exceeding the amount of basic pension and pension supplement (the minimum pension). This means that there is no special tax deduction for pensions above the amount of SEK 109,000 (EUR 11,511).
No contribution from pensioners.