15 johan sjostrom
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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?
Thank you for your attention!