Key Takeaways

• The European Commission defines occupational pension as the type paid by the employer and notes that there are four main occupational pension agreements in Sweden.
• Occupational pensions must be "set up by an employer on behalf of an employee." However, employees have a right to choose the insurance company that manages their pension money.
• When people in Sweden turn 65, occupational pension companies like Pensions Myindigheten contact them to find out when they wish to withdraw their pension.
• The European Commission reports that occupational pensions in Sweden represent 25-35% of people's total pension. It adds that around 90% of employees in Sweden get an occupational pension through their employer.

Introduction

Types of Occupational Pensions in Sweden

• The European Commission defines occupational pension as the type paid by the employer and notes that there are four main occupational pension agreements in Sweden.

ITP

• One occupational pension agreement is for a private employee. For example, the ITP occupational pension caters to white-collar employees who receive a salary in the private sector and who are employed by companies that have signed a "collective agreement between the Council for Negotiation and Cooperation (PTK) representing employees and the Confederation of Swedish Enterprise (Svenskt Näringsliv) representing employers."
• ITP has several plans under it. ITP 1 is for employees born in 1979 or later, and ITP 2 for employees born in 1978 or earlier. ITPK is a plan that supplements the ITP 2 plan.

• Collectum administers the ITP 1 occupational pension. Here is where private sector employees choose where to invest their ITP. Collectum selects the companies that employees can engage to manage their ITP pension. Each year, Collectum sends an annual statement detailing customers' ITP occupational pension. Alecta, a mutual insurance company, administers ITP 2.
• Members can withdraw ITP 1 pension when they hit 55 years. To receive a full pension from ITP 2, members must contribute towards the insurance for 30 years or 360 months.
• ITP 1 members receive a life-long annuity monthly or a fixed-period annuity based on amounts contributed. ITP 2 is a defined benefit plan paid monthly or as a fixed-period annuity based on "the number of insurance years and as a share of the final salary, 10% up to a ceiling of 7.5 times the ‘income base amount."

SAF-LO

• LO and SAF are occupational pensions for manual workers in the private sector. Employers contribute 4.5% of wages up to the statutory pension ceiling and 30% of wages above the ceiling for workers aged twenty-five and older.
• Members can pick from six insurance companies that offer traditional insurance and five companies that provide unit-linked annuities. Those that don't choose a fund have their wages put in a fixed annuity.

PA03

• The PA03 scheme is for state employees. It covers central government employees aged 23 and older. Here, 2% of 4.5% of the employers’ contribution on earnings up to the ceiling are placed in fixed annuity products (the Kåpan tjänste). For the "2.5% that is left, members choose between fixed and unit-linked annuity products."
•  Nine companies provide fixed annuities and thirteen provide variable annuities. Each company's offerings range from four and thirty-one.
• Those who don't choose a fund have their wages put in a lifelong fixed annuity. "Members can also choose a survivor’s benefit financed by the balance in the participant’s pension account at death, but this reduces the overall pension. DB principles apply to incomes up to the statutory ceiling, as well as to members born before 1973."

KAP-KL and AKAP-KL

• KAP-KL and AKAP-KL are for municipal employees. The KAP-KL scheme was created in 2006, and originates in the Sveriges Kommunalanställdas Pensionskassan formed in 1922. KAP-KL covers municipal employees aged 21 and older and born before 1986. Employers pay 4.5% of wages up to the statutory ceiling into individual pension accounts, members allocate their contributions to either a fixed or unit-linked annuity product.
• In the KAP-KL, "three companies provide fixed annuities, while twelve offer unit-linked annuities. Members can choose between four and forty funds depending on how many get offered by the selected company." Those who don't choose a fund have their wages put in a fixed annuity fund.

• AKAP-KL was introduced in 2015 and covers workers born starting in 1986. The scheme is DC and has no minimum age for one to become a member.
• Employers have an obligation to contribute 4.5% of salaries up to the statutory maximum and 30% above it. Members are given the same investment choices as those in the KAP-KL scheme.

 

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Statistics and Costs Associated With Occupational Pensions

• The European Commission reports that occupational pensions in Sweden represent 25-35% of people's total pension. It adds that around "90% of Sweden's employees receive an occupational pension through their employer."
• According to FIAP International, the occupational pension contributes 4.5% on earned income.
• According to Øresunddirekts, "Nine out of ten employers’ occupational pension serves as a supplement to the public pension."
• The "total annual fees and premiums for national pension, occupational pensions, and private pensions are estimated at SEK 549 billion, of which the national pension’s SEK 334 billion represents 61 percent."

Occupational Pension Administration Activities

• Occupational pensions must be set up by an employer on behalf of an employee. However, employees have a right to choose the insurance company that manages their pension money.
• The amount of occupational pension that a person receives depends on factors such as the agreement the pension falls under.
• Part of the occupational pension is "defined benefit, meaning that one is guaranteed a certain percentage of their final salary when they retire."
• Part of the occupational pension is premium-based, and the total amount one receives depends on how the money performs in the funds they choose to invest in.
• When people in Sweden turn 65, occupational pension companies like Pensions Myindigheten contact them to find out when they wish to withdraw their pension.

Research Strategy