Sweden Expat Pensions

  • A] The Pension System

    The Swedish pension system has three Pillars:

    • Pillar 1: State Pensions;
    • Pillar 2: Occupational Pensions;
    • Pillar 3: Private Pensions & Wealth.
  • B] Pillar 1: State Pensions

    I. The Structure

    Sweden’s State Pension has one unique element compared to other countries within the EU. This as (a minor) part of the social security contribution is paid into Individual Investment Accounts and a funded pension is built up with independent fund management companies.

    The State Pension is based on your lifelong Swedish income. Every year you work and pay taxes, you earn additional National Public Pension.

    The Swedish Pensions Agency administers and pays out the National Public Pension. It can have four elements:

    • 1] Income Pension                         : The basic and major component.
    • 2] Income Pension Complement  : A possbile addition as of 2021.
    • 3] Premium Pension                      : The individual pension investment.
    • 4] Guarantee Pension                    : An addition for the poor elderly.

    The National Public Pension is paid out lifelong. The longer you work, the higher your monthly pension as the pension is paid for fewer years and you continue to acquire extra pension claims.

    Your wages in Sweden also affect your pension. There is a limit to the Pensionable Income used for the calculation of the pension. The limit is SEK 501,000 which is 7.5 times the Income Base amount.

    There is also a Guarantee Pension if you have low or no Income Pension. It is calculated on periods of residence and the size of the total income based pension.

    The public pension is indexed every year to follow price and wages increases. The pensions mentioned in this chapter are taxable unless otherwise stated.

    If you were born between 1938-1953, a Supplementary Pension can also be included in your National Public Pension.

    If you were born before 1938, your National Public Pension consists of a Supplementary Pension, an Income Pension Complement and any Guarantee Pension.

    In the calculation of your Guarantee Pension, the time of residence and the size of the income-based pension are taken into account. You should have lived in Sweden for at least 40 years from the year you turned 16 until you turned 64 to receive full Guarantee Pension. If you also have insurance periods in other EU/EEA countries, those periods are taken into account when calculating the Guarantee Pension.

    If you might be on parental leave, studying with study grants, doing compulsory service, receiving sickness or activity compensation or are receiving unemployment benefits, you will receive compensation for your pension from the State.

    You can also receive extra money deposited into your National Public Pension during your child's first four years of life. If you have adopted your child, you can be entitled to pension for the first four years that you have had the child in your care, no longer than until the year when the child reaches the age of 10.

    If you live in Sweden and have a low pension, you can also apply for housing supplement and income support for the elderly.

    If a loved one dies, you can receive a survivor's pension, which is financial support for the loss of income for you as a survivor.

    II. Premium

    Every year 18,5% of your Pensionable Income is earmarked for your retirement pension. 16% goes to your Income Pension and the remaining 2.5% to the Premium Pension.

    The Premium Pension is capital that is placed in funds that you actively can choose yourself. If you make no choice, it is placed in a pre selected fund. The Premium Pension was implemented as of 1995. If you have worked in Sweden as of 1995, you have the right to a Premium Pension.

    III. Type Of Pay-Out

    While the pay-out is flexible and possible as of age 62, there is only the lifelong annuity version and no Lump Sum or Flexi Draw Down option.

    IV. Retirement Age

    There is no fixed retirement age in Sweden. You can apply for your Income Pension from the month you become age 62 at the earliest and there is no upper age limit.

    You have the right to work until you are age 68* but you can also work for longer if you and your employer agree on this.

    Your right to earn pension rights have no upper age limit. The Guarantee Pension is granted from the month you become age 65.

    * Increasing to age 69 in 2023.

  • C] Pillar 2: Occupational Pensions

    I. Structure

    An important condition for a Swedish approach to occupational pensions is a robust collective bargaining system with mandatory occupational pension coverage.

    Employers and Unions negotiate the details of occupational pensions in four Sectoral Collective Agreements:

    • SAF-LO                       : Blue collar private sector workers.
    • ITP                              : White collar workers in the private sector.
    • PA03                           : For state employees.
    • KAP-KL/AKAP-KL       : For municipal employees.

    90% of the employees in Sweden receive an occupational pension through their employer. Most employees are included in one of these four main occupational pension agreements. If you have worked in different areas, you may have several occupational pension claims.

    How much you receive in occupational pension depends on things such as the agreement you fall under.

    Part of the occupational pension is Defined Benefit (DB) which means that you are guaranteed a certain percentage of your wages when you retire.

    The biggest part of it is premium based Defined Contribution (DC) and this is placed in funds that you can choose yourself. How much you receive depends on how the funds you have chosen develop.

    In general you can say that your occupational pension will represent 25-35% of your total pension.

    Finally as a self employed person, student or unemployed person, you receive no occupational pension.

    II. Funding

    There are three methods available to companies to fund pension benefits:

    • Pension Funds;
    • Pension Insurances;
    • Book Reserves ( Like in Germany).

    However, their use is influenced by the type of plan concerned and in some cases even specific providers have to be used.

    Book Reserves and Pension Funds are most frequently used for a guaranteed DB system. For investment based DC liability Pension Insurance is the usual choice. Risk benefits are typically fully insured, even if the company uses a Pension Fund or Book Reserves for financing its pension plan.

    Pension Insurance is the most common form for financing pensions in smaller companies and it is also the dominating form for financing occupational pension for blue collar workers.

    Larger companies typically participate in the ITP plan and use Book Reserves in combination with credit insurance for securing the pension liability. Still, Pension Funds are proving to be increasingly popular vehicles, especially among larger companies.

    III. Implementation

    A] Organizational

    When Employers and Unions decided to introduce funded DC pensions, they needed to create an organisation and rules that would facilitate individual investment choice at minimum cost and offer a minimum level of security.

    Individual DC investment accounts are administered by Clearinghouses modelled on the statutory Premium Pension. Employers and Unions own the Fund Clearinghouses for SAF-LO and ITP schemes.

    Employers and Unions use their bargaining power to negotiate favourable contracts with financial service companies, keeping management fees very low. Employers and Unions also carefully screen financial providers to exclude high risk funds.

    B] Investment Risk

    Finally like the Statutory Premium Pension, occupational pension schemes have mechanisms for encouraging (or even requiring) pension contributors to avoid risky investments.

    Both the large public sector schemes require participants to place half of their pension contribution in a fixed and guaranteed annuity product.

    Participants in private sector schemes are free to choose any fund option within the range selected by employers and unions.

    IV. No Minimum/Maximum Claim

    There is no lower or upper limit for the occupational pension in the same way as for the public pension. However, you can have higher contributions to the occupational pension for the part of your salary that exceeds the maximum amount of the public pension and is not included in the public pension.

    For example, a contribution of 4.5% of the employee's salary is paid up to the maximum limit of the public pension. After this, the employer pays a contribution of 30% of the salary to the occupational pension.

    V. Retirement Age

    In the majority of agreements, you have the right to receive this from the age of 65. In some agreements however, you can receive the pension earlier but it will then be significantly lower due to actuarial re calculation as you get paid sooner and build up less.

    VI. Pay-Out Period

    Nearly all occupational pension plans allow participants to choose between a:

    • Lifelong pension annuity;
    • Defined pay-out period with a minimum of five years.
  • D] Pillar 3: Private Pensions

    Private pension saving is voluntary and stands for individual wealth.

    Entrepreneurs who do not have an occupational pension scheme can make tax deductions for their private pension savings.

  • E] Occupational Pension Oversight

    I. Structure

    ‘Finansinspektionen’ (FI) conducts supervision of undertakings which have received authorisation from FI to conduct business on the financial market.

    The main task of FI’s supervision is to prevent problems on the financial markets but the resources for supervision are limited. FI must therefore prioritise its work. FI’s approach is that the supervision will be risk based and forward looking.

    The purpose of insurance supervision is to secure a reasonable balance between the risks and solvency of insurance undertakings so that they can fulfil their obligations to policyholders.

    It is also important to monitor the insurance sector from a consumer protection perspective to ensure that consumers are able to make well informed decisions based on relevant and comprehensible information.

    II. Undertakings Under Supervision

    The undertakings under supervision in the insurance area regard four groups:

    • Limited Insurance Companies (Life/Non-Life).
    • Mutual Benefit Societies.
    • Pension Funds.
    • Insurance Intermediaries.

    III. International Supervisory Colleges

    Swedish insurance undertakings are active in other countries and foreign undertakings are active on the Swedish market.

    The supervision of insurance undertakings with operations in several countries is conducted through Supervisory Colleges. Which are groups of representatives from the Supervisory Authorities in the countries where the insurance company is active.

    Work in the colleges is governed by agreements between the countries’ authorities.

  • F] Retirement Age

    There is no fixed retirement age in Sweden. You can apply for your Income Pension from the month you become age 62 at the earliest and there is no upper age limit.

    You have the right to work until you are age 68* but you can also work for longer if you and your employer agree on this.

    * Increasing to age 69 in 2023.

  • G] Pay-out Flexibility

    Both governmental as occupational pensions have a flexible pay-out regarding the starting age. Needless to say that the sooner the pay-out starts, the lower the amount due to building up less and receiving during a longer period.

    Regarding State Pensions there is no flexibility regarding the manner of payment: Lifelong annuity only and thus no Lump Sum nor Flexi Draw Down options.

    Regarding Occupational Pensions there is a choice between Lifelong annuity versus a shorter pay-out period of minimum 5 years.

  • H] End of Participation

    Due to the four big Collective Pension Agreements many employees have worked in several sectors and thus at pension age get a pay-out from each relating sector. Thus no transferring of the existing claim to the new pension provider.

    Likewise if you have an Occupational Pension Plan and leave Sweden, that claim cannot be transferred to the new occupational pension plan. Maybe EU law will require that in the future this has to be possible.

    If you have acquired a Swedish State Pension Claim and retire in another country, that claim will i.e. be paid to you in that other country.

  • I] Pensions & Tax

    The Swedish Income Tax has the following 2020 rates:


    Taxable Income (SEK)                                     Rate*

    • 0                      -             20,008             0%
    • 20,008             -           468,700           32%
    • 468,700           -           675,700           52%
    • As of 675,700                                       57%

    * Total of national and municipal rate.

    Non Residents

    Non residents working in Sweden for a non Swedish employer without a PE in Sweden are tax liable in Sweden if the beneficiary of the employee’s work is an entity in Sweden and the work is performed under the management and control of the Swedish entity. The tax rate is a flat 25%.

    An exception applies if the employee is working in Sweden for less than 15 days in a row and less than 45 days in total during a calendar year.

  • J] International Pensions

    I. State Pensions

    Retire In Sweden

    If you have lived or worked in another country, you may be entitled to a pension from that country. If you state in your application for a Swedish pension that you have previously lived or worked in a country within the EU but now live in Sweden, the Swedish Pensions Agency will ask you to provide supplementary information.

    However, it is the Swedish Pensions Agency who contacts the relevant authorities in these countries and apply for your pensions.

    Retire Abroad

    If you work and pay tax in Sweden, then you will earn a Swedish State Retirement Pension. You are entitled to the pension even if you live in another country. The latter might mean that you will not receive certain aspects of that Swedish State Pension.

    If you live within the EU, you should contact the pension authority in the country where you live to apply for a Swedish pension. To obtain your Swedish pension when you live abroad, you must send a 'life certificate' to the Swedish Pensions Agency once a year.

    However, this does not apply if you live in Finland, Norway, Denmark, USA, Poland, Island or Germany as these countries send information electronically to the Swedish Pensions Agency.

    II. Occupational Pensions

    The pay-out from Swedish occupational pensions abroad is in general no problem. A transfer of value from these claims abroad is not always possbile. Maybe this might change due to new EU legislation.

    III. International Tax

    When you receive pensions from a country in which you do not live, you should check a possibly existing Double Tax Treaty between those countries. Which prevent and/or mitigate double taxation at residence and at source.

    IV. Additional Information

    For more information, feel free to contact:

  • K] News April 2021

    Sweden: Tax Pensioners In Portugal

    Swedish Parliament is set to vote on unilaterally ending an agreement with Portugal to not tax citizens receiving their pensioners there.

    Following in the footsteps of Finland in 2018, Stockholm now also wants to see its expat pensioners in Portugal taxed as they would be in their home countries.

    Portugal recently changed its non-habitual resident regime to enforce a blanket ten percent tax on foreign pensions, but Sweden argues this is inadequate and not in accordance with an agreement signed with Lisbon in 2019.

    A logical step and I expect many EU countries to follow!


    Swedes To Get Varying Pension Increases In 2021

    Swedish pension recipients will get a total pension increase of between SEK 70 and SEK 550 per month, after tax, in 2021, according to the Swedish Pensions Agency.

    It said the size of the increase differs between different pensioners. A novelty in the system for 2021 is the income pension supplement, which will begin to be paid out in September.

    There are several different factors that affect how the different parts of the pension develop. The compliance index governs income and supplementary pensions and will increase by 0.5 per cent for 2021. The price base amount, which affects the guarantee pension and defined benefit occupational pensions, will increase by 0.6 per cent.

    Commenting, Swedish Pensions Agency analyst, Linda Wiese, said: “The change in pension differs greatly between different groups of pensioners. But most people will get an increase in their total pension by between SEK 70 and SEK 550 per month after tax.

    “The increase in the pension will be greater after tax than before tax due to next year's tax reduction and the tax reliefs that will be introduced for pensioners next year.”

    Every year, pensioners usually see changes of some kind. For 2021, it is a matter of lower tax on pensions from the age of 66. In addition, there is a tax reduction on the income of the elderly. A so-called income pension supplement will also be introduced from September onwards for those who have a general pension between SEK 9,000 and SEK 17,000 per month.

    “The income pension supplement is decided by the Swedish Pensions Agency without the need to apply. We test the right to the income pension supplement in connection with applying for a pension. The supplement will be from SEK 0 kronor to SEK 600 before tax,” Swedish Pensions Agency pension specialist, Agneta Claesson, said.