Sweden’s income gap shrinks for first time since financial crisis

Sweden's growing income gap has decreased for the first time since the financial crisis. But foreign residents are still much poorer than native Swedes.

Sweden's income gap shrinks for first time since financial crisis
Income disparities have grown in Sweden over time. Photo: Adam Wrafter/SvD/TT

On the whole, Swedish households' economic standard continued to increase in 2018, according to a new report by number crunchers Statistics Sweden on Wednesday.

But compared to 2012-2015, when the economic standard improved by 9.0 percent, it increased at a much slower rate in recent years, with a modest 3.0 percent growth in 2015-2018 and 0.8 percent in 2018.

Meanwhile, the income gap shrank in 2018 to the lowest level since 2014. It was also the first time the income gap between rich and poor decreased in Sweden since the financial crisis of 2008.

The decrease can be linked to lower capital gain for the wealthy in 2018, a challenging year for the Stockholm stock exchange.

When capital gain was excluded from the calculation, income differences remained relatively stable in 2018 and the 2010s. And despite the decrease in 2018, income inequality has grown in Sweden over time.


Statistics Sweden's report also noted that the income gap between foreign-born people and people born in Sweden has remained more or less stable in the past decade, including in 2018 when foreigners' economic standard was 77 percent of native Swedes' economic standard.

In terms of fast income growth, single women in their 20s without children were the winners of the past decade, racking up a 28 percent income growth between 2011 and 2018 (compared to 19 percent for single and childless men in the same age group).

The year 2018 was also the first year in which more than 100,000 people – three quarters of whom were men – earned a total income of more than one million kronor ($103,941). 

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Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information: 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK.