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Swedish Pension System

Questions on how it works?

explore3788
post 27.Feb.2013, 03:04 PM
Post #1
Joined: 27.Feb.2013

Hello Localers, I am new to this site and have some questions that those who live in Sweden may be able to help.

Questions about the Swedish pension system

Now if I am wrong, someone please correct me. I would appreciate learning more.

1. It would take approximately 40 years of full contribution to get about 50 % of salary upon retirement in the Swedish pension system( is the rough estimate correct)?

I know that in the 90’s Sweden revamped its pension system from a direct benefit system to a direct contribution system. If a Swede who has been away from Sweden since age 25 goes back to Sweden at age 41, by the time he retires at 65, 24 years of contribution would definitely not be something that is enough to retire on, would it?

2. What is the percentage of salary per month that is set aside for pension ? Is it 18.5 percent or ?

3. Is this percentage for pension separate from the income taxation or included in the income tax percentage ?

4. The state or “allmanspension” cannot be inherited by the spouse/ estate of the deceased and it dies with the deceased?

5. So public employees like teachers( in non private schools for example) get to be enrolled in a private pension or do they only have the option of contributing to the state pension?
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johnjohn
post 27.Feb.2013, 03:09 PM
Post #2
Joined: 10.Dec.2010

Go to the pension site. It is in English as well as other languages.
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explore3788
post 27.Feb.2013, 03:14 PM
Post #3
Joined: 27.Feb.2013

JohnJohn, are you talking about this site http://www.government.se/sb/d/15473/a/183496

Based on the info that I have read, and I may be wrong, can someone still answer my questions as stated above?
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johnjohn
post 27.Feb.2013, 03:19 PM
Post #4
Joined: 10.Dec.2010

No, Google Swedish pension authority
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Silberfüchschen
post 27.Feb.2013, 03:54 PM
Post #5
Location: Europe
Joined: 24.May.2012

QUOTE (explore3788 @ 27.Feb.2013, 03:04 PM) *
1. It would take approximately 40 years of full contribution to get about 50 % of salary upon retirement in the Swedish pension system( is the rough estimate correct)?I know t ... (show full quote)

Hopefully, he saved for his pension also in the country where he was working between age 25 and 41, was he not?

QUOTE
2. What is the percentage of salary per month that is set aside for pension ? Is it 18.5 percent or ?
3. Is this percentage for pension separate from the income taxation or included in the income tax percentage ?

The employer pays 18.5 percent on top of your gross salary. It is separate from income tax.

QUOTE
4. The state or “allmanspension” cannot be inherited by the spouse/ estate of the deceased and it dies with the deceased?

See http://www.pensionsmyndigheten.se/Survivor...berDies_en.html.

QUOTE
5. So public employees like teachers( in non private schools for example) get to be enrolled in a private pension or do they only have the option of contributing to the state pension?

Everyone contributes to the state pension scheme. In addition, employers usually contribute to an occupational pension scheme. This is decided by a collective agreement with the unions and can vary depending on the field of work.
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snarky
post 27.Feb.2013, 04:18 PM
Post #6
Joined: 22.Jan.2013

See below. this is from my svensk sambo, who specializes in retirement savings, insurance, pension, etc. Hope it helps. smile.gif

1. How much you get back depends on 1) How long you work 2) Your salary.

18.5% is the amount that gets paid in, but if you have a higher salary for 10 years and then change jobs to one with a lower salary, you might still end up having a higher retirement payment than most in comparison to your salary when you finally retire. But 40 years is about accurate.

However, there’s also a guaranteed amount that you get when you have lived in Sweden for long enough (40 years) between the age of 16 – 64. This amount is deducted by 1/40 for every year under 40 years that you have stayed in Sweden, so if you have lived here for 30 years but only worked for 10 years, you’re entitled to quite a lot(most likely) more than you have paid in.

2. 18.5% of your yearly salary. 16% of which the Swedish pensions system administer (called inkomstpension) and 2.5% which you administer yourself (called PPM).

3. You pay 7% yourself, which will show on your income declaration. However, you also get the 7% deducted from the total taxes that you owe, so really, it’s paid for by the government. The rest is paid for by your employer in social fees.

4. Nope, if you pass away the money goes back to the collective.

5. Every employer that is a part of the different unions also pay an additional 4.5% every year for your retirement, this gets added on to what you get from the government. If you haven’t signed an agreement with a union you don’t have to pay the additional 4.5%, however, most employers still do. (This area should be covered in your contract with your employer.)

On top of this, you can also save in private pensions, or exchange salary for extra retirement money etc.

Also, it might be worth to mention that there is a “roof” in the government system, so if you make over 7.5 inkomstbasbelopp (424 500 SEK 2013) you won´t be getting the 18.5% on the amounts over that. However, this is regulated by the employer instead paying 30% on amounts over that.
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snarky
post 27.Feb.2013, 04:30 PM
Post #7
Joined: 22.Jan.2013

He just sent me this for #4 -

Should probably clarify on #4 that there are systems in place to cover this as well though. When you start taking your PPM out you get offered to get it covered for the remaining amount to go back to your spouse once you pass away. However, for the inkomstpension is not covered by this. Now, depending on when you were born and when you get married there are other systems in place for this, such as the änkepension and omställningpension and barnpension.
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johnjohn
post 27.Feb.2013, 04:43 PM
Post #8
Joined: 10.Dec.2010

Does anyone know for those who have a low income and not lived a very long time in Sweden the government will top off, increase this pension to what amount at the minimum.
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Essingen
post 27.Feb.2013, 04:49 PM
Post #9
Joined: 2.Nov.2008

QUOTE
Also, it might be worth to mention that there is a “roof” in the government system, so if you make over 7.5 inkomstbasbelopp (424 500 SEK 2013) you won´t be getting the 18.5% on the amounts over that. However, this is regulated by the employer instead paying 30% on amounts over that. - See more at: http://www.thelocal.se/discuss/index.php?s...h.8phCQamx.dpuf


Many people....particularly older employees still get around 65% of their salary over this cut off point, based on 30 years of contributions. This is because the state scheme was revampled some years ago, but private schemes have only just been so, and often only for younger employees coming into them.

This results in the curious situation where the higher paid get relatively better pensions than those with less pay. People who get very low pensions will qualify for housing allowance. So as usual, the people in the middle are the losers.
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explore3788
post 27.Feb.2013, 05:14 PM
Post #10
Joined: 27.Feb.2013

Snarky you are the best and thank your sambo for the info too! :-) Great info!

The situation is that there is a non EU woman married to a Swede. Both are 41 and have a 4 year old child.The husband left SE for the UK around age 25 without having worked at a real job and is now self employed in the UK with little contribution to the UK system. The wife has a part time job as a teacher's aid. (at least she has a job in the UK)The Swede also did an online distance teaching degree with the help of a CSN loan of 450,000 sek !! They are both planning to return to Sweden thinking that they would be much better off financially IF he gets a job as a teacher in the Stockholm region. Realistically, I believe that if they find it hard to make ends meet in London, it will be harder to make ends meet in the Stockholm region and in 20 to 25 years time, when they retire, they would be hard pressed to have a comfortable life given the reasons stated below.

1. If it takes approx 40 years to make 50 percent of salary, it is unrealistic for the husband to work till 81 to realize full pension. The 450,000 sek CSN repayment too will eat into a teacher's meagre salary.Plus the couple will have to depend on one salary until the wife finds a job (we all know how hard that is to find a job as a foreigner)

2.The wife has no degree and not much by way of skills and have to learn swedish from scratch. Age discrimination in Sweden would not help them too, being 41. It is not easy to find a teaching job especially if the degree is a distance learning one, not from a brick and mortar University. Sweden's universitites like Uppsala and Stockholm Unis plus the other colleges around the Stockholm area already have a ready pool of graduates fresh and young in their twenties with true blue degrees and who have done pratik's while they were in their teaching programs, giving them a foot through the door, so why would they hire a 41 year old Swede with an online degree who has not lived in Sweden for the last 15 years?

3.Living in Stockholm and Uppsala also means a higher cost of living, higher prices etc.Having a second child in one's forties especially when in debt to the tune of 450,000 sek and depending on one income is foolish. Housing costs in the Stockholm area are also very high, Sweden also has the 2nd highest taxation in the world compared to Denmark(taking into account all taxes)

4.Most foreign wives who don't work and who depend on their husbands without much monies put aside for retirement need to think about digging their way into financial graves now . The retirement is meant for one person and it dies with the contributor. Even with the govt setting aside privisions for widows and children, I doubt these privisions will be enough to help a widow live comfortabily in her old age, given the scenario I had outlined above.

I suggested that the wife think about these issues before they move to Sweden. Short term gain can lead to long term pain and one must think of the twilight years now especially at their age, moving to another country can result in great losses that can be disastrous years down the road.

Do you all think that my advice to this couple is valid ?
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snarky
post 27.Feb.2013, 07:14 PM
Post #11
Joined: 22.Jan.2013

QUOTE (johnjohn @ 27.Feb.2013, 04:43 PM) *
Does anyone know for those who have a low income and not lived a very long time in Sweden the government will top off, increase this pension to what amount at the minimum.

Hej John!

My Sambo says this -

There is the guaranteed amount, which is around 7-8,000 sek a month. However, that is if you have lived in Sweden for 40 years. Example, if you have only lived her for 10 years, you would only get 10/40th of that amount. But if you have been working and paying into the system, the gov will reduce the guaranteed pension as well as add on income pension instead. Example, if you get 8,000 from the guaranteed one and 5,000 from the income one, then the gov deducts maybe around 3,500-4,000 sek so the total amount is still higher than the guaranteed one. It is part guaranteed and part income. You can also get money from the government for living expenses, other subsidies, etc.

Edit: I missunderstood my sambo and he says that pension from your employer or pension that you save up privately does not lower your guaranteed amount from the government.
More about it here http://www.pensionsmyndigheten.se/Guarante...wIncome_en.html
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Essingen
post 27.Feb.2013, 08:06 PM
Post #12
Joined: 2.Nov.2008

QUOTE
The situation is that there is a non EU woman married to a Swede. Both are 41 and have a 4 year old child.The husband left SE for the UK around age 25 without having worked at a real job and is now self employed in the UK with little contribution to the UK system. - See more at: http://www.thelocal.se/discuss/index.php?s...h.zFGX5sSQ.dpuf

I think you are correct. They would probably have a better future in the UK. They are both young enough to start making pension contributions in the UK system and they have employment.

Don't forget that in the UK, people on low incomes are almost taken out of tax with high levels of personal allowances. There are virtually no personal allowances in Sweden. If he is self employed, they should probably try and move out of London to reduce their costs.
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snarky
post 27.Feb.2013, 08:24 PM
Post #13
Joined: 22.Jan.2013

I agree with you and Essingen, it seems more logical to stay where they are now.

I think the main thing they need to start worrying about is to start saving for retirement now.
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explore3788
post 28.Feb.2013, 11:25 AM
Post #14
Joined: 27.Feb.2013

Essingen,

Can you please elaborate on what you wrote..Don't forget that in the UK, people on low incomes are almost taken out of tax with high levels of personal allowances ?

What are the high levels of personal allowances in the UK?
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explore3788
post 28.Feb.2013, 11:48 AM
Post #15
Joined: 27.Feb.2013

Snarky and Essingen,

This couple is convinced that they will have a "better life" with the government subsidies that they think Sweden will offer them, but they are not considering other aspects, high cost of living (food, services etc) and the fact the they will be contributing to a pension system that would pay out peanuts upon retirement.The wife is in an extremely precarious position. She will be entirely dependent on her husband and if anything should happen to him she would be in hot soup and penniless. She is under the impression that she can get a job and would be willing to take a cleaner's job. Well, not without Swedish and with the influx of immigrants, she would be in competition even for cleaning jobs. There is a reason why research has shown that the Somalis upon reaching 5 years and citzenship in Sweden, many of them make an exodus to the UK for better opportunities in starting businesses etc.

Age descrimination is also prevalent. In the UK, she has had this part time job for a few years and can get another part time job if necessary. She has a track record here in the UK but none in Sweden ,not her husband either though he is a Swede. They own a car here and are under the impression that with a new teacher's salary and only one salary they can own a car in Sweden. I told them that even getting a flat in the Stockholm or Uppsala area would be a huge huddle. Even if they found suitable housing, they might have to get a co sign from their relatives.They also own a large CSN debt relative to their paltry potential income. In the UK, if the spouse dies, the other spouse can get some of the retirement monies, versus none in Sweden from the state pension .In the UK, if you pay 6 months to a year's rent, you can get some landlords to rent you a place, whereas in Sweden, if you don't have a regular job with 3 months of pay stubs, it may be very hard to find a place to rent even if you have money in the bank, without verifiable employment, finding a permanent place to live is next to impossible.

I believe this couple were sold the idea of Sweden being a haven for state subsidies without taking into consideration the timing of their move. They are just fixated on having a second child and think that Sweden will be their answer to a comfortable life.Swedes in Sweden have a relatively comfortable life but they have been paying into the system all their working lives.

There is also a reason why Swedish women work rather than stay home . They know that their retirement is their individual responsibility.Even then, research has shown that many women will retire with less money than expected because they cut down their working hours by 75% or 50 % percent after having children. Women already make less money than men in Sweden in many professions(so much for feminism, women don't hold the reins of economic power in industry)

If I were the wife, I would not move to Sweden after age 41 unless you have a chunk of change saved and invested. Otherwise twenty odd years down the road, there will be drastic consequences and too late for regrets!! By then if might also be too late to move back to the UK since she doesn't have UK citizenship and ILR may expire after you move to another EU state and take up residence there.
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