Tag: pensionsmyndigheten

Pension effects of Covid

This orange envelope tells you your pension
pic: affärslivet.se

The pension system in Sweden is made up of three parts – all of which are affected by Covid. Now even the age at which people can go into retirement is changing – that is, it’s staying the same because the Swedish Pension Agency has their hands full dealing with the bump in pension payments the government mandated as a part of their Covid survival plan.

The Swedish pension system, putting it in its simplest possible terms, has three parts: your own savings, the public pension that comes from the state and which is based on how many years you’ve worked and how much money you made, and then the work pension that many people, but not all (sadly), have because their job set aside extra for them. (There is also a tiny sliver called the Premium pension, which is 100% stock-market based, but it only accounts for a very small fraction of a pension.)

Because the stock market is now at depression levels, SvD reports that the public pensions are likely to be 1.5% less because of market effects. The work pension, tjänstepension, isn’t that effected for the moment, the paper reports, but they will be if Covid goes on for a long time. The people with the lowest pension will be affected the most – per usual.

On, perhaps, the upside, the pension age – at what age people can be allowed to go into retirement – was also going to go up this year. People were going to have to work longer (see this post for more info). However, because the pension agency is kinda busy, they’re just not going to get it together in time for these changes to kick in. They’ll likely get it together next year, but for some people who were really looking forward to not going to work anymore, it’s a bit of a reprieve.

It’s not much of a silver lining, but it’s a little something.

23 Oct. – living longer working longer

working hard working longer
pic: corren.se

We’re living longer, so we have to work longer. That’s the story from the Swedish Pensions Agency (pensionsmyndigheten). As of January 1, 2020, one has to have turned at least 62 to collect your pension from the state. By 2026, the age from which you can collect your state pension will be 64. After 2026, the retirement age will strictly follow average life expectancy. For those who were born in 1963, the earliest you can get your general pension will be when you turn 64. But to get your guaranteed pension (guarantipension), and the housing subsidy if needed (bostadstillägg), you have to wait until you are 67. Different numbers will almost certainly apply for those born after 1963.

The age at which you can take out the general pension, or take out your guaranteed pension and housing subsidy, is going to be directly connected to average life expectancy. This age is going to be called something like “age benchmark” – riktålder in Swedish. This means that as we live longer in the future the earliest one can take out the general pension, guaranteed pension or housing subsidy will also be equivalently later.

The age benchmark (this is what I’m calling it for lack of an official translation) will be set yearly and start to be used six years later. It can not be changed for three years.

In 2026, when the age benchmark will begin to be used, the lowest age to take out the general pension will be three years before the age benchmark. The age benchmark will likely be 67 in 2026, which makes age 64 the earliest you can take out the general pension. There are also other suggestions in the works that would create “bridges” to this pretty drastic change in the pension system.

This is complicated stuff, and the whole thing with “age benchmarks” is entirely new. For people who had already begun planning for retirement it can mean a whole new ball game. In 2023 though, you’ll also be allowed to work until you’re 69 – so that’s an upside, right? You can even work longer if your employer is good with it, although exceptions may apply depending on your union.

(Most of this information was taken from pensionsmyndigheten.se. Check it out for more information.)

Not everybody thinks this particular plan is great, although everyone agrees that the formal retirement age really had to be raised because of longer life expectancy. Still, people with physically demanding jobs can have a worse time of it, and the age discrimination that is already well documented will not get any better. Many people have trouble keeping their jobs even now.

“It’s not so easy to just raise the retirement age” Kristina Kamp, a pension economist at the website Min Pension (my pension) pointed out. “You also need acceptance of the fact that more older people will keep working. We’re already talking about age discrimination. It’s going to be interesting to see how the job market will handle these new numbers…” Kamp also pointed out that company retirement plans are not at all synced with the numbers the government has decided on (SvD.se/pension).

These changes will likely lead to further developments in the amount of money that is automatically put aside for your pension from your paycheck, but those ideas are not yet fully worked out. With the interest levels where they’re at, saving for retirement in a bank account is not so rewarding either. This blog, sadly, has no advice for the pecuniarily anxious.