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Johan Sjostrom. Marketing Director, KPA PENSION (SWEDEN). Friday, 27.9.2013. First and Second Pillar Pensions in Sweden. Conference on Pensions, September 2013, Hydra. Ev datum. The Swedish pension system. State pension (I pillar): Based on income 18.5% on ones’ income is set aside - PowerPoint PPT Presentation
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Johan SjostromMarketing Director,
KPA PENSION(SWEDEN)
Friday, 27.9.2013
First and Second Pillar Pensions in Sweden
Conference on Pensions, September 2013, Hydra
Ev datum
State pension (I pillar): • Based on income• 18.5% on ones’ income is set aside• Income pension (16 percentage points)
• Pay-as-you-go, notional defined contribution• Premium pension (2.5 percentage points), individual choice of funds• Guaranteed pension (minimum level)• 46 430 EUR (2013) is the ceiling for accruing pensions rights
Occupational pension (II pillar):• Nation-wide collectively negotiated agreements
• Covering appr. 90 % of the workforce• Paid by employer, DC, individual choice
The Swedish pension system
1994Parliamentadoptsprinciplesof thenewpension plan
1991Commissionset up
1992Draftof a new pensionplan
1998Mainlegislationof thenewpension plan
2001Legislationon the automaticbalancemechanism
But transition quick i international comparison
2003 first payments according to new system
Socialdemocraticgovernment
Center-rightgovernment
Pension reform process - very long
1990 1991 1994 1998 2001 2003
Socialdemocraticgovernment
Civil servantsLocal & regional govern. empl.
Private white color
Private blue color
Swedish “pension market”, payments
ATP “old” old-agepensionplan
Inkomstpension (new)Premium pension (new)
6.2
1.0
Guaranteed pen. 1.00.6Survivors pen.
7.8
1.0 1.6
9.3
10.3
1.5
75%
15%
10%Occupa-tional
Public
Private
Percent of GDP“Market share”
0.0
Second pillar - four main collective agreements
White collar
750 000
Blue collar
1 200 000
Private sector employees Public sector employees
State
215 000
Municipals and Regions
1 100 000
Second pillar pensions – contributions/repl.rates
Collective agreement DC (contributions and income ceilings)
DB
Private sector,Blue collar
4,5 % < 46 430 EUR30 % > 46 430 EUR
Private sector,White collar
4,5 % < 46 430 EUR30 % > 46 430 EUR
< 1979 (DB)> 46 430 EUR
State sector 4,5% < 105 710 EUR Appr. 60 %replacement> 46 430 EUR
Municipals and regions 4,5% < 46 430 EUR30% > 46 430 EUR
< 1985 DB> 46 430 EUR
Swedish market – second pillar pensions
Market volumes, life insurance
Where can Mr Svensson invest his second pillar pension?
Traditionell Försäkring
KAP-KL*
SAF-LO
PA-03*
ITP
FondförsäkringIcke-valsbolag
KAP
KTP
What’s the status of my pension?
The orange envelope
• Started in 1999
• Distributed each year to citizens born in 1938 and later
– Pensionable income > 1 843 EUR
• Distribution:– January to March
• 6,2 Million envelopes each year (population 9,3 Million)
Projections made in the orange envelope
Age of retirement 0 % growth
61 year
65 year
70 year
Does Mr Svensson read his orange envelope?
Does Mr Svensson understand the orange envelope?
www.minpension.se
• Implemented in 2004
• 1,8 million users (2012)
• A joint initiative by the State and the Insurance Industry
• I, II and III pillar pensions
• A tool for individual forecasts
Pension forecasts from different sources
Orange envelope
Yearly statement &projections I pillar
Green envelope
Yearly statement &projections II pillar
My pensionwww.minpension.se
Forecasts on-demandI, II and III pillar
Initiatives in the near future
• Increasing minimum pension age – Currently at 61 year in first pillar
– Currently at 55 year (DC) and 61 year (DB) in second pillar
• Premium Pension in first pillar?– Funded or not funded?
– Number of funds?
• Tax incentives for third pillar pensions?– To be or not to be?
• Financial literacy– How can Mr Svensson be more financial literate?