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BANKS

Pension fund favours banks not savers

Sweden's banks are the only winners from the Premium Pension Authority (PPM) fund system. Despite plunging portfolio values fund managers have managed to pull in billions of kronor from the scheme.

Pension fund favours banks not savers

Fund management firms have earned more than eight billion kronor ($980 million) from the PPM system which was launched in 2000.

Savers have however in contrast lost a total of 33 billion kronor from the PPM system which is the upper tier of the Swedish state pension system with a fixed contribution level collected via the tax system.

The “orange envelope” annual statements have been dropping through the letter-boxes of Swedish households in recent weeks and have made discouraging reading for those hoping to see steady growth in their pension pot.

Pensions savings have declined on average by 0.8 percent per annum since the first payments were set aside for the scheme in 1995.

In comparison with the general state pension scheme, in which the money would have otherwise been placed, which has returned 3.5 percent per annum.

In total Swedes have pumped in 264 billion into the system. The value at the end of 2008 amounted to 231 billion kronor, a decline of 33 billion kronor.

The explanation behind the dramatic fall in value is evidently the massive stock market crash that has occurred over the past year. The development is compounded by the timing of the launch of the system, in 2000, when the last broad downturn in stock market values occurred.

PENSIONS

Sweden to increase retirement age from next year

A proposal for changes to Sweden’s pensions system could see incremental increases to retirement age beginning next year.

Sweden to increase retirement age from next year
Photo: Hasse Holmberg/TT

The proposal for reform to state pensions has been agreed on by parties on both sides of the political aisle, reflecting the political agreement which provided for the new Swedish government.

Later retirement age has been justified by the claim that people in Sweden “live longer and healthier lives”, but the last twelve years of life remain characterised by illness and failing health, news agency TT writes.

According to the proposal, the minimum age at which a state pension may be drawn will increase next year from 61 to 62 years. The right to retain employment, the so-called LAS age, will also be increased, from 67 to 68 years.

“We see a problem with the fact that people who want to continue working are not able to. We will now give people the opportunity to do that,” said Mats Persson of the Liberal party, who was part of the parliamentary group behind the proposal.

In 2023, retirement ages will increase again, with the minimum state pension age changing to 63 and the LAS age to 69. The so-called guaranteed pension, which is paid to those who have had little or no pension-qualifying income during their working lives, will also see an increased age limit from 65 to 66 years.

2026 will see further extensions, to 64 years and 67 years for the regular and guaranteed pensions respectively.

In a press statement, the government wrote that longer and healthier lives made the reforms to retirement age possible. Average life expectancy in Sweden has been found to increase by 3.5 hours every day.

But longer life expectancy does not necessarily correspond to better health in senior years, according to research.

International studies led by the Institute for Health Metrics and Evaluation (IHME) and the University of Washington recently found that Swedes have relatively high life expectancy – just under 82 years for both women and men – but that years with good health are considerably fewer, at just under 70 years.

Sweden fell outside of the top ten for countries with the most years of good health, the study found. Japan was the best-performing country, followed by Singapore, Andorra, Iceland and Cyprus.

The pensions proposal could therefore mean that retirement years will become increasingly unlikely to contain many years in which senior citizens can enjoy good health.

Persson told TT he disagreed with that conclusion.

“This agreement is based on the fact that we live longer as well as healthier lives. There is research to support that,” he said.

READ ALSO: How to manage your pension in Sweden – even if you're not planning to stay

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