Pensions complémentaires (volontaires)

Regulatory Framework

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2019: Occupational Pension Business Act; regulates the establishment, licensing and operation of occupational pension companies, Currently (autumn 2019) under demand of acceptance by Parliament.

2010: Insurance Business Act; regulates the establishment, licensing and operation of insurance companies, including insurers established within the European Economic Area.

1999: Income Tax Act; Ch. 28 on employers' pension costs and Ch. 58 on pension insurance.

1998: Act on Foreign Insurance Business in Sweden; regulates the establishment, licensing and operation of insurers established outside the European Economic Area.

1990: Pension Assets Yield Tax Act; provides for tax to be payable on the average long-term yield on pension fund assets.

1972: Mutual Benefit Societies Act; regulates the establishment, licensing and operation of mutual benefit societies, in particular funds that provides occupational pension plans. The law was abolished in 2011, but these mutual benefit societies may continue to apply the law via provisional regulations until the new Occupational Pension Business Act enters into force

1967: Pension Safeguarding Act; outlines the methods for implementing complementary occupational pension plans and contains regulations to protect the rights of plan members.

Plan Profile

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Plan sponsors

Employers, singly or as a group, may establish complementary occupational pension plans for their employees.

Almost all plans result from nationwide collective bargaining between employee and employer representatives.

Types of plans

Complementary occupational pension plans have generally been established by nationwide collective agreements and must be implemented by all employers covered by the agreement.

Membership is compulsory for all eligible employees of an employer covered by the collective agreement, irrespective of whether they are trade union members or not.

ITP: A collective agreement between the Confederation of Swedish Enterprise (Svenskt Näringsliv - SN) and the Council for Negotiation and Co-operation (Förhandlings- och samverkansrådet - PTK). ITP2 is a defined benefit plan providing old-age, disability and survivorship benefits for members born in 1978 or earlier. Another plan - ITP 1 applies to members born in 1979 or later and is a defined contribution plan for old age benefits, but it also provides disability benefits and optional survivorship benefits. An employer may in some cases be restricted to ITP 1 for all employees.

The implementation of ITP is the responsibility of each employer and may be done through:
- insurance contracts with an insurance company;
- establishment of book reserves (internal accounting for old-age pension promises, sometimes in combination with a pension foundation).

Disability and some survivorship benefits must be insured with Alecta, which is a mutual insurance company. Under ITP 1 members have a number of options for placing the contribution, except for the premium for disability and some survivorship benefits. Up to 50 per cent of the contribution for old-age benefits can be placed in unit-linked insurance, while the rest is placed in traditional insurance with guaranteed benefits. There is a list of companies available for these choices. Members who do not make an election are insured with Alecta.

ITPK: Members of ITP 2 also participate in the supplementary ITPK and it is a complement to the defined benefit ITP 2. ITPK is a defined contribution plan for salaried employees. It is implemented through an insurance contract with an insurance company of the member's choice. Members who do not make a choice are insured with Alecta.

Avtalspension SAF-LO: A collective agreement between SN and the Swedish Trade Union Confederation (Landsorganisationen i Sverige - LO) has established a defined contribution plan known as the Avtalspension SAF-LO plan . The plan is implemented through an insurance contract with the insurance company of the member's choice.

KAP-KL: A plan for local government, including municipalities, county councils, regional and municipal companies. It applies to members born in 1985 or earlier and is a combined defined contribution and defined benefit plan regarding old age benefits. It also provides survivorship benefits. Another plan AKAP-KL applies to members born in 1986 or later and is a defined contribution plan for old age and survivorship benefits.

PA 16: A plan for government employees and some other categories of employees. For employees born before 1988 it is a combined defined benefit and defined contribution plan. For the other younger members it is a defined contribution plan.

Other plans: Most other plans established by employers not covered by the collective agreements outlined above are aligned to ITP, ITPK or SAF-LO and provide similar benefits.

No authorization is required for establishing a plan.

Institutional Framework

Déplier

All plans: Pension plans are not subject to authorization. The establishment and operation of insurance companies and special occupational pension institutions are subject to a licence from the Financial Supervisory Authority (Finansinspektionen - FSA).

To obtain this licence, specific requirements concerning the form and content of the articles of association and the financial status must be fulfilled and the intended business must comply with legal requirements.

ITP 2: In the case of insured ITP 2 plans, the insurance policy must be contracted with a mutual insurance company, Alecta. The board of directors of Alecta consists of representatives of policyholders (i.e. sponsoring employers) and beneficiaries (i.e. plan members).

If liabilities (ITP 2) are accounted for internally through the establishment of book reserves, the employer must register with the PRI-system. To do so the employer must take out a credit insurance and register the pension commitments with PRI Pensionsgaranti (a mutual insurance company). The PRI calculates the pension liability and the corresponding provisions, and manages the benefit administration. When employees retire, it disburses the pensions and charges the employer for such payments.

ITP 1/ITPK: An administrative company Collectum (owned by SN and PTK) manages the contributions and the individual´s choice of insurance company for ITP 1 and ITPK. The insurance companies manage the contribution and benefit administration. The ITP Board resolves issues concerning ITP plans that may merge. Many employers outside the Confederation of Swedish Enterprise (SN) mimic the ITP plan, but contract with other insurers.

Avtalspension SAF-LO: An administrative company Fora manages the contributions and the individual´s choice of insurance company for Avtalspensions SAF-LO. Fora is an administrative company owned by the SN and the Swedish Trade Union Confederation (LO). Fora underwrites the insurance agreements with employers, collects and distributes contributions. The insurance companies manage the contribution and benefit administration. The Pensions Board resolves issues concerning the Avtalspension SAF-LO that may merge.

PA 16: An administrative company SPV manages the contributions and the individual´s choice of insurance company for PA 16. SPV is also the administrator of the defined benefit plan. Insurance companies and an occupational pension fund "Kåpan Pensioner" manages the defined contribution plan.

KAP-KL and AKAP-KL: Two administrative companies Pensionsvalet and Valcentralen manages the contributions and the individual's choice of insurance company for KAP-KL and AKAP-KL.

Coverage

Déplier

ITP: Private-sector salaried employees. Disability insurance commences at age 18 and coverage for old-age and survivorship benefits at age 25.

SAF-LO: Private-sector wage earners from age 25. KAP-KL: Local government and county council employees. The entry age for earning pension rights is 21 (defined contribution), the entry age is 28 for earning defined benefit pension. There is no specific entry age for earning pension rights within AKAP-KL.

PA 16: Central government employees with no specific entry age.

Other: The self-employed may buy individual pension savings products offered by insurers, banks or security companies. Information on these is not covered in the following sections.

Financing / Investment

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Sources of funds

Employee contributions

All plans: None.

Employer contributions

ITP 1: 4.5 per cent of monthly wages up to SEK 40,250 (annually 7.5 times the income base amount per year), 30 per cent of the excess, starting from age 25.

ITP 2: Differs significantly between individual employees, depending on factors such as age, salary level and amount of accrued rights.

ITPK: 2 per cent of salary (if ITP 2).

Avtalspension SAF-LO: 4.5 per cent of wages up to 7.5 income base amounts and 30 per cent of the excess, starting with the wages from the month of reaching age 25.

KAP-KL: 4.5 per cent of salary from the month of reaching age 21, up to 30-income base amounts. One income base amount equalled SEK 64,400 as at 1 January 2019.For employees with salary exceeding 7,5 income base amounts, a defined benefit pension right is added with contributions that would differ, similar to ITP2. For employees covered by AKAP-KL the contribution is 4.5 per cent of wages up to 7.5 income base amounts and 30 per cent of the excess.

PA 16: For the defined benefit plan, the employer contribution differs significantly between individual employees, depending on factors such as age, salary level and amount of accrued rights. For employees born 1988 or later a defined contribution pension based on 6 per cent of monthly salaries up to SEK 40,250, and 31,5 per cent of the excess and with no right to a defined benefit pension. For older employees, 4,5 % for the defined contribution part combined with rights to a defined benefit pension if born before 1973 or anyway for monthly salary parts exceeding SEK 40, 250 (annually 7.5 times the income base amount per year).

Other sources of funds

All plans: None.

Methods of financing

ITP: Funded or accounted for internally through the establishment of book reserves.

Disability and survivorship benefits must be insured with Alecta, a mutual insurance company.

ITPK: Funded.

Avtalspension SAF-LO: Funded.

KAP-KL: Local government authorities with the right to levy taxes may choose not to fund defined benefit pensions.

PA 16: Defined benefit pensions are not funded for most state authorities, but funded in some other cases.

Asset management

All plans: Asset management restrictions for insurance companies and occupational pension institutions are governed by EU rules about prudent investment principles.

ITP 2: Plan assets are managed by Alecta, a mutual insurance company, in the case of implementation through an insurance contract, or sometimes in the case of implementation through the book-reserve system PRI through establishment of a pension foundation.

ITP 1/ITPK: The members may either decide to leave the asset management to an insurance company and earn a share of the insurance company's return or they may invest their assets in a unit-linked insurance fund of their choice. Such assets can also be managed by the employer or the employer's pension foundation, provided a proper credit insurance is in place and permission is granted to the ITP Board.

Avtalspension SAF-LO: Plan assets are managed by the insurance company chosen by the member. The choice is organized by Fora, a separate company administered by the Confederation of Swedish Enterprises (SN) and the Swedish Trade Union Confederation (LO). Individuals who do not make a choice are placed with the pension insurance company AMF Pension. Plan assets can be transferred to a number of other insurers.

KAP-KL: Plan assets are managed by the insurance company chosen by the member. The choice is organized by one of three occupational pension institutions, and individuals who do not make a choice are placed with KPA, an occupational pension institution. Plan assets can be transferred to a number of other insurers.

PA 16: Individual plan assets are managed by the insurance company chosen by the member. The choice is organized by SPV, an occupational pension institution, and individuals who do not make a choice are placed with Kåpan Pensioner försäkringförening, a mutual occupational pension fund for state employees.

Benefit provisions

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Acquisition and maintenance of rights

Waiting period

All plans: There is no waiting period.

Vesting rules

All plans: Full and immediate vesting.

Preservation, portability, transferability

ITP 2: No portability or transferability in ITP 2. Assets are not transferred when changing employer, while staying a member of the same plan. The new employer takes over the members insurance. If the member leaves the ITP 2, the rights are preserved and indexed until retirement age.

ITP 1/ITPK, SAF-LO, KAP-KL & PA 16: Full portability of rights when a member changes employer but stays in the same category of employment. No portability, however, if employees of the new employer are not covered by the same plan. In this case, rights are preserved and indexed (or affected by investment results) until retirement age.
Members may change insurance company even if not changing employer.

Retirement benefits

Benefit qualifying conditions

All plans: Pensionable age is 65 for both men and women, although there are legal possibilities to work until the age of 67. There are usually upper age limits for retirement and the accumulation of benefits. According to the ITP 1 plan, an agreement with the employer can extend the limit for accumulation of benefits beyond 65. Otherwise, the usual retirement and accumulation limit is 65. With regard to ITP 2, the accumulation of benefits limit is 65, while retirement can be postponed beyond 65 at will. For ITPK the common limit is 65. The SAF-LO plan has an accumulation limit of 65 and no upper retirement limit. KAP-KL plans have an upper age limit of 67 for retirement and 65 for accumulation of benefits. PA 16 plans have an upper age limit of 65 for accumulation of benefits, but no limit for retirement.

Early retirement is usually allowed, in which case benefits are reduced.

Benefit structure / formula

ITP 1: Defined contribution, with 1.0 per cent (of the contribution) deduction for administrative costs incurred by Collectum. Deductions are also made for survivorship benefit contributions.

The accumulated capital is transformed into a pension payable for life. It can also be paid as a pension payable over a shorter time, but not for less than five years.

ITP 2: Defined benefit.

Benefits are integrated with social security benefits by applying different replacement rates for different salary levels (step-rate integration). A full pension after 30 years of service equals:

- 10 per cent of final salary up to 7.5 times the income base amount;
- 65 per cent of final salary between 7.5 and 20 times the income base amount;
- 32.5 per cent of final salary between 20 and 30 times the income base amount.

The income base amount equalled SEK 64,400 as at 1 January 2019.

Benefits are reduced proportionally in the case of shorter contribution periods.

ITPK (part of ITP 2): Defined contribution.

The accumulated capital is paid over a fixed period. Pensions are usually paid for five years between ages 65 and 70 but payment can start earlier or later (at the latest at age 70) and can be extended for a longer period.

Avtalspension SAF-LO: Defined contribution.

The accumulated capital is transformed into a pension payable for life. It can also be paid as a pension payable over a shorter time.

KAP-KL: Defined benefit and defined contribution.

For defined benefit plans, a full pension after 30 years of service equals:

- 55 per cent of the pension base between 7.5 and 20 times the income base amount, plus
- 27.5 per cent of the pension base between 20 and 30 times the income base amount.
There is a higher compensation for employees born 1966 or earlier.

The pension base corresponds to salary averaged over a period close to the time of calculation.

For defined contribution plans, the accumulated capital is transformed into a pension payable for life. It can also be paid out as a pension over a shorter time, five or ten years.

PA 16: Combined defined benefit and defined contribution.

A full defined benefit pension after 30 years of service depends on the year of birth - higher compensation for employees born before 1973 -, being lower for younger persons, who will earn more defined contribution pension, and equals:

- from 0 to 9.5 per cent of the pension base up to 7.5 times the income base amount;
- from 60 per cent to 64.85 per cent of the pension base between 7.5 and 20 times the income base amount;
- from 30 per cent to 32,4 per cent of the pension base between 20 and 30 times the income base amount.

For defined benefit pension, the pension base amount is linked to the salary during the last five years of service. There are limited possibilities for transforming the defined benefit pension from an annuity for life to a temporary pension.

For defined contribution plans, the accumulated capital is transformed into a pension payable for life. It can also be paid out as a pension over a shorter time, between five and twenty years.

Benefit adjustment

ITPK/ITP 1: Pension adjustments depend on investment returns achieved by the insurance company or similar.

ITP 2: In the case of plans implemented through an insurance contract, the board of directors of Alecta, a mutual insurance company, decides annually on a pension supplement in order to compensate for inflation. The supplement may at a maximum correspond to the change in the Consumer Price Index.

In the case of implementation through the book-reserve system PRI the indexation is the same as for pensions in Alecta.

Avtalspension SAF-LO: Pension adjustments depend on investment returns achieved by the insurance company.

KAP-KL: Pension adjustments are mainly linked to the price base amount used as the income ceiling for sickness benefits (i.e. SEK 46,500 as at 1 January 2019) and for defined benefit pension. For defined contribution pension, the adjustments depend on investment returns achieved by the insurance company.

PA 16: Pension adjustments are made according to the change in the price base amount used as the income ceiling for sickness benefits and pensions (i.e. SEK 46,500 as at 1 January 2019) for defined benefit pension plans. They depend on investment returns achieved by the insurance company chosen for defined contribution pension plans.

Survivors

ITPK/ITP 1: Survivorship benefits are optional for the member, except the TGL benefit. One type is called repayment protection and entails the payment of remaining pension capital to survivors in the form of a temporary annuity. The other type is a temporary annuity to survivors in the case of the member's death before reaching pension age.

TGL capital insurance is mandatory and is worth six price base amounts if death occurs between ages 18 and 55. For higher ages, the sum insured is reduced, depending on age and work-hours, reducing to one price base amount for those aged 69. The benefit ceases when the member leaves employment.

ITP 2: Spouse pensions are payable provided that the marriage took place prior to the deceased reaching age 60, or if after age 60 the marriage has lasted for at least five years or a child resulted from the marriage. The full spouse pension equals:

- 0 per cent of the deceased member's salary between 0 and 7.5 times the income base amount;
- 32.5 per cent of the deceased member's salary between 7.5 and 20 times the income base amount;
- 16.25 per cent of the deceased member's salary between 20 and 30 times the income base amount.

The income base amount equalled SEK 64,400 as at 1 January 2019.

Benefits are payable to orphans under age 20 and vary according to the number of eligible orphans and depending on whether a parent is alive. The total benefit shared in equal parts by the orphans is a percentage of the full spouse pension:

Number of children	One parent	Full orphan
1	55%	75%
2	75%	110%
3	85%	135%
4	95%	150%
Each additional child	+10%	+10%

If orphans' pensions are payable, the spouse pension is reduced to 75 per cent of the full spouse pension.

Avtalspension SAF-LO: Survivorship benefits are optional for the member.

One type is called repayment protection and entails the payment of remaining pension capital to survivors in the form of a temporary annuity. Another type is a temporary annuity to survivors in the case of the member's death before reaching pension age. TGL capital insurance (mentioned above) is also a benefit.

KAP-KL & PA 16: Survivorship benefits are mandatory and optional respectively: a survivor's benefit paid to an adult, an orphan's pension and a supplementary widow's pension.

Spouse pensions are payable provided that the spouses lived together at time of death and either the marriage has lasted for at least five years, or the survivor at the time of death lived together with children under age 12. The children must be under the guardianship of one or both of the spouses.

TGL capital insurance (mentioned above) is also a benefit. For retired employees, there are no survivorship benefits except payment of remaining pension capital in defined contribution pension to survivors.

Disability

ITP 1 and 2: Members must be at least age 18 and have been 25 per cent disabled for 90 consecutive days or 105 days in the previous year.

The disability pension equals:

- 15 per cent of previous salary up to 7.5 times the price base amount;
- 65 per cent of previous salary between 7.5 and 20 times the price base amount;
- 32.5 per cent of previous salary between 20 and 30 times the price base amount.

The price base amount relevant to disability benefits was SEK 47.400 as at 1 January 2019.

Avtalspension SAF-LO: The members belong to a group sickness insurance scheme in AFA, an insurance company owned by SN and LO.

The benefits complement the statutory sickness with 15 % of the sickness benefit for day 15-360 and the activity or sickness compensation when paid.

KAP-KL: No disability benefits.

PA 16: If entitled to sickness benefit from the Social Insurance Office, members will also receive a disability pension.

The disability pension equals:

- 15 per cent of previous salary up to 7.5 times the price base amount;
- 75 per cent of previous salary between 7.5 and 20 times the price base amount;
- 37,5 per cent of previous salary between 20 and 30 times the price base amount.

The price base amount relevant to disability benefits was SEK 46,500 as at 1 January 2019.

Protection of Rights

Déplier

ITP & ITPK: Where pensions are not provided through insurance then the employer (policyholder) pays premiums to a guarantee fund run in the form of a Pension Guarantee Mutual Insurance ( run by PRI Pensionsgaranti) which takes over pension liabilities where the employer is insolvent. The guarantee fund entitled to recover from the policyholders or the bankruptcy estate the amount paid. The policyholder may terminate the contract with the guarantee fund at any time through the purchase of pension insurance.

The guarantee fund also has a system of reinsurance to cover extremely unfavourable claims in any single year.

SAF-LO: If an employer is insolvent, a guarantee fund administered by Fora (see section on institutional framework) pays the premium.

All plans: In some cases collateral is required from the employer.

Protection of Assets

All plans except ITP 2: Plan assets corresponding to defined contribution pensions must be kept by the insurance company completely separate from the assets of the sponsoring employer.

ITP 2: If implemented through insurance contracts plan assets must be kept by Alecta, a mutual insurance company.

There is no asset separation if implemented through the establishment of book reserves.

Financial and Technical Requirements / Reporting

All plans: Insurance companies must submit annual reports to the Financial Supervisory Authority (FSA) before 1 April each year.

This annual report must cover:

- financial statements, e.g. the balance sheet and profit and loss account;
- solvency statements and reporting according to Solvency II demands; and
- technical aspects, e.g. an actuarial analysis of the annual result.

Audited annual accounts (i.e. balance sheet and profit and loss account) must be prepared and submitted to the Swedish Companies Registration Office together with the auditor's report. In all nationwide insurance companies and major local insurance companies, at least one of the appointed auditors must be a qualified accountant. The FSA may for these companies appoint an additional auditor to work with the auditors appointed by the company.

Domestic insurance companies are required to submit quarterly solvency statements.

ITP: No reporting requirements in the case of book reserve plans.

Pension foundations must submit their annual accounts to the local supervisor (county administrative board).

Whistleblowing

All plans: There are no legal requirements.

Standards for service providers

All plans: Auditors of the accounts of nationwide and major local insurance companies must be qualified accountants and independent from the companies being audited.

Fees

All plans: There are no legal requirements.

Winding up / Merger and acquisition

All plans: Winding up, as well as mergers and acquisitions of insurance companies, are governed by the Insurance Business Act.

Bankruptcy: Insolvency Insurance / Compensation Fund

ITP 2: Employers that implement ITP through book reserves must insure the risk of insufficient assets in the case of insolvency with a guarantee fund managed by the PRI Pensionsgaranti, a mutual insurance company (PRI).

PRI is a mutual non-life insurance company only transacting insurance for safeguarding pension rights. Its board of directors consists of representatives of policyholders (i.e. sponsoring employers) and the Confederation of Swedish Enterprise and PTK.

The guarantee fund takes over pension liabilities in the case of insufficient assets upon insolvency. PRI is entitled to recover from policyholders or the bankruptcy estate the amount paid.

In the case of employers using the book reserve method, the yearly contribution as of 1 January 2019 is 0.4 per cent of accrued benefits and in the case of employers establishing pension foundations, 0.1 per cent of accrued benefits.

PRI undertakes a credit assessment of companies using the book reserve method. If the credit worthiness is found to be unsatisfactory, PRI may demand collateral for the insolvency guarantee.

ITP 1/ITP 2/ITPK: Upon insolvency of a sponsoring employer, a guarantee fund administered by Collectum (see section on institutional framework) pays outstanding contributions.

Avtalspension SAF-LO: Upon insolvency of a sponsoring employer, a guarantee fund administered by Fora (see section on institutional framework) pays outstanding contributions.

KAP-KL and PA 16: There are no legal requirements. There is no policyholder guarantee fund in force.

Disclosure of information / Individual action

All plans: An insurance company or a pension institution must provide information on the plan and financial situation of the company or institution. Pension foundations need not, however, provide information about the plan. In any case, most of the information on plans is provided by the employer.

ITP: Collectum sends a benefit statement to members when they join a plan, including information on the estimated old-age, disability and survivorship benefits. A new statement is sent every year and when the situation of the plan member changes (e.g. salary changes, employment changes etc.).

ITPK/ITP 1: Beside the above mentioned benefit statement many insurance companies provide members with annual information about their accumulated assets.

Avtalspension SAF-LO: Fora provide members annually with information on:

- the amount and the development of their assets;
- the contribution paid by the employer; and
- the administrative fees charged by the respective insurance company.

Other measures

n/a

Tax Treatment

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Taxation of employee contributions

All plans: Employees do not contribute.

Taxation of employer contributions

All plans: Tax-deductible if the costs doesn´t exceed 35 % of the individual´s salary with a ceiling of 10 times the price base amount (465.000 SEK in 2019).

Employer contributions are subject to social security contributions but are not considered as taxable fringe benefits for employees.

Taxation of investment income

All plans: Taxed at a rate of 15 per cent, but on a prescribed basis reflecting average long-term yield, not actual yield.

Taxation of benefits

All plans: Taxed as earned income.

Regulatory and Supervisory Authorities

Déplier

Financial Supervisory Authority: Supervises insurance companies, banks and security companies.

The Financial Supervisory Authority (FSA, in Swedish Finansinspektionen, FI) carries out supervision mainly through the examination of documents submitted by supervised entities and through regular on-site inspections. In the latter case, inspectors must be given access to all information available in books, correspondence, minutes, contracts, internal statistics, cost analyses etc.

FSA may request any necessary information concerning the operation of supervised entities.

FSA may, if necessary and under prescribed circumstances:

- take appropriate measures to protect the rights of policyholders and to ensure compliance of insurance companies with legal requirements;
- prohibit or restrict the disposal of the assets of an insurance company; or
- withdraw the licence of the insurance company.

All supervised entities must pay a contribution to cover the expenses of the FSA and fees are charged e.g. for licences. The Ministry of Finance decides the budget for the FSA

Finansinspektionen
Box 7821
103 97 Stockholm
Sweden

Tel.: (+46) 8 408 980 00
Fax: (+46) 8 241 33 5

Internet: http://www.fi.se

Pension foundations are supervised by the administrative boards of the 24 counties in which they are established and in some aspects by the FSA. One of the largest is the County Administrative Board of Stockholm.

Länsstyrelsen i Stockholms län
Box 22067
SE 104 22 Stockholm

Tel.: (+46) 8 785 40 00
Fax: (+46) 8 785 40 01

Internet: http://www.ab.lst.se

The registration authority for insurance companies is the Swedish Companies Registration Office.

Bolagsverket
SE 851 81 Sundsvall

Tel.: (+46) 60 18 40 40
Fax: (+46) 60 12 98 40

Internet: http://www.bolagsverket.se

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