​AMF Demands Overhaul Of Swedish Pension Rulebook

Sweden should overhaul its pension legislation to ensure the state pension can keep pace with inflation, according to one of the country’s biggest pension providers.

In a new report, the SEK590bn (€55.9bn) pension fund AMF – which is jointly owned by the Swedish Trade Union Confederation and the Confederation of Swedish Enterprise – also said the trend towards members withdrawing their occupational pensions early in retirement must be halted.

AMF said that, while next year was expected to bring legislation to raise the default retirement age and boost basic financial protection, politicians also needed to safeguard the income protection element of the state pension.

Dan Adolphson Björck, economist at AMF, said: “A higher retirement age is not for everyone, and it is possible to strengthen the public pension without sending the bill to employees or employers. Today, one third of employers’ contributions do not go to pensions and social insurance, but to the state’s budget.”

There was much debate on both sides of the political spectrum about tax reform, he added, so it should also be discussed how much of that went to the public pension.

“Otherwise, the link between a long working life and a reasonable pension risks being reduced for large groups with relatively low wages,” he said.

In its report, AMF outlined five specific proposals for regulatory change, including safeguarding the lifelong income principle of the public pension, harmonising public pensions and occupational pensions, and the introduction of a single occupational pension for individuals regardless of the number of employers they have over their careers.

Adolphson Björck also warned about possible consequences of the trend for Swedes to withdraw their pensions early on in retirement, rather than opting for a lifelong payout stream.

“Taking part of your occupational pension in a short period is undramatic,” he said. “But taking out entire occupational pensions in a few years leads to a large loss of income when one has to manage on the public pension and any private savings alone.” 

Information abut the benefits of lifelong payments had to be better, he said, particularly with payment rules set to become more flexible in the future.