A review of the Swedish pension system

By: Robb Stark


Sweden has long had a general pension system available for everyone – being as it is a country dominated by socialist government and values for a long time. It has changed to and from over the years to end up becoming a very modern and evenly distributed pension system. I will briefly explain how it works.
Back in 1913 the Swedish government implemented the folkpension (peoples’ pension). This allowed only for small amounts of money to be paid out and a lot of people struggled to make ends meet with what they were given. Some of the more white-collared workers had an additional pension plan worked out together with their employers which meant that a small portion of their salary was put away and later became an additional pension. The government thought this was a good idea and after much debate in the nineteen fifties, they implemented a general pension based on peoples’ salaries, called the ATP, in nineteen sixty. After more than thirty years, the government re-organized the pension system once again in nineteen ninety four because they felt it was too costly to have this kind of beneficial pension system. After the reformation, the pension system is now in part based on one’s life income and part on premiums that are paid.
The different parts that make up the pensions each represent various amounts of the total pension. The part called general pension is funded through taxes, i.e. everyone that is currently working and paying taxes are at the same time leaving a small part for themselves later on. In addition, the government recently made a small part of the general pension available for speculation in the financial market. People can choose between a number of market funds and the like to try and improve their final pension.
Moreover, in addition to the general pension, most working people have something called avtalspension or tjanstepension, the most common one called IPT. The ITP and others are regulated through negotiations between different unions and the employing companies, and the additional pension is paid out by the employers. Employees are often given the choice of where the money should be placed, which bank, fund, market area and so forth.
Most people also set up a private pension plan in addition to the general and ITP to be able to cover expenses for the future. There are many companies today focusing on pension administration. Depending on which field of work you are in, different companies offer different custom tailored pension solutions and benefits.
As a result of Sweden being very socialistic oriented, the general pension also offers a guarantee for lowest pay-out. This is for people of low or no income whatsoever during their lifetime and it is very low. The level of guarantee states that you have to have lived in Sweden for at least forty years however.
To start receiving pension from the government, people can choose retire from the age of sixty one and forward. Sweden no longer has an official retirement age so everyone has to apply to get their pension. Monthly payments of twenty five, fifty, seventy five or one hundred pension percent are offered. Private pension plans like ITP and others may have special agreement that varies for pay-outs.

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Robb is writing about the Swedish pension system. Read more at pensionsspara sjalv or for lighter things, see rolig firmafest.

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