ORANGE REPORT 2020  
Annual Report of the Swedish Pension System

Orange Report 2020
The Orange Report 2020 describes the financial position of the national income-
based pension system at the end of 2020, its evolution in 2020, and three scenarios
for the future. To put the national income-based system in context, it is related below
to, inter alia, information on occupational and private pensions. However, data for
these insurance systems are so far only available up to and including 2019, thus the
amounts below refer to 2019. Private pension refers only to data on tax-deductible
pension savings.
Total annual fees and premiums for national pension, occupational pensions, and
private pensions are estimated at SEK 549 billion, of which the national pension’s
SEK 334 billion represents 61 percent. The wage bill in Sweden amounted to
approximately SEK 1,940 billion in 2019 (including earnings of the self-employed).
This means that we set aside an amount equal to 28 percent of our salaries for
various pensions.
Funded capital in the national pension amounted to SEK 3,152 billion on December
31 2019. This corresponds to approximately 46 percent of total funded pension
capital in Sweden at one time. The Swedish Pensions Agency paid out
SEK 326 billion in inkomstpension and premium pension in 2019. It equates to
67 percent of the total amount paid out that same year.
The Orange Report thus accounts for significantly more than half of Sweden’s
pension activities involving contributions and disbursements. The fact that it reflects a
lower proportion of funded capital is due to the fact that inkomstpension is a
distribution system with a buffer fund and not a fully funded pension system.
In 2019, in addition to inkomstpension and premium pension, the Swedish Pensions
Agency paid out guaranteed pension to the amount of SEK 13 billion. Other pension-
related benefits paid by the Agency during the year to elderly persons include
income-based widow’s pension of SEK 10 billion, housing supplement of
SEK 9 billion and maintenance support for the elderly of SEK 1 billion. These benefits
are financed from the state budget and are not reported in the Orange Report.
What is Orange Report?
1

Table of contents
1.
Results of the Pension System in Brief
5
2.
Income Statement and Balance Sheet
10
3.
Accounting principles
15
4.
How the National Pension System Works
21
5.
Costs of Administration and Capital Management
46
6.
Changes in the Value of the Pension System
56
7.
Three scenarios for the Future of the National Pension System
64
8.
Notes and Comments
85
110
124
A. 
Appendix Calculation Factors  
B. 
Appendix Mathematical Description of the Balance Ratio 
C. 
Appdenix List of Terms 
129
2

In March 2020, the WHO classified Covid-19 as a
pandemic. In February–March, world stock
markets fell rapidly and sharply, but recovered in
the latter part of the year. The Covid crisis is still
hitting large parts of society hard. In Sweden,
unemployment has risen and employment has
fallen. The impact on the national economy and
our future pensions is difficult to predict, as this
depends on various factors such as the duration of
the pandemic, the evolution of unemployment,
and the support measures put in place to mitigate
the pandemic’s effects.
The Orange Report, the annual report of the national
pension system, shows that the financial position of
the inkomstpension system is strong, and that the
indexation of pensions paid and pension balances in 2022 will not be affected by the system’s
financial position despite the impact of the pandemic on society. The balance ratio for 2022 is
already set at 1.0824 and exceeds 1.0000, which means that automatic rebalancing will not
be activated. Assets exceeded liabilities by SEK 806 billion. This corresponds to just over
8 percent of the total pension liability.
The report also shows that premium pensions are still being phased in and that premium
pension capital continues to grow.
The Swedish Pensions Agency is working to move its operations in a more sustainable
direction and contribute to Sweden’s achievement of the Agenda 2030 goals. We see that our
actions matter. Our reviews of the funds on the Agency’s fund market show that they generally
meet our new requirements in terms of sustainability, commissions, and management. Among
premium pension savers, we see an increased interest in sustainability, and we have made it
easy to choose sustainable savings on the fund market. Women and younger savers are more
likely to actively choose funds with, for example, low carbon risk or to opt out of fossil fuels,
pornography, nuclear weapons, and gambling concerns.
In 2020, the adequacy of pensions, as well as the difference between baseline social security
and income-based pensions, have continued to be topical issues in the public debate. In
December, Parliament decided to increase the pensions of some people through an
inkomstpension complement, which is a supplement to the national public pension for those
with long working lives at low pay. The inkomstpension complement will be paid as of
September 2021 and will be financed from the national budget rather than from pension
contributions.
In 2020, the minimum age for taking national public pension was raised from 61 to 62, and
the rules for the allocation of inheritance gains were adjusted.
The pension system is
fundamentally stable, but a recession can lead to a reduction in payments. The future scenarios
in the Orange Report show that assets are expected to be sufficient to avoid rebalancing even
under pessimistic assumptions about future developments.
Daniel Barr
Director General, Swedish Pensions Agency
A Stable Pension System Despite the Effects of the Pandemic
3

Further information on the Swedish national public pension system is available at the Swedish
Pensions Agency’s website:
www.pensionsmyndigheten.se
For information on the National Pension Funds, please see the websites of the respective
funds:
www.ap1.se, www.ap2.se, www.ap3.se, www.ap4.se, www.ap6.se and www.ap7.se
(premium pension)
We at the Swedish Pensions Agency thank our readers for their questions and views, which
have helped enhance the quality of the Orange Report.
Published by the Swedish Pension Agency
Editor: Ole Settergren
Project manager: Inger Johannisson
IT architect and developer: Markus Andersson
Technical project manager: Linnea Lantz and Arvid Sondén
Adaptation and analyses of data: Johan Adler, Karl Birkholz, Erland Ekheden, Erik Ferm, Dan
Frankkila, Stefan Granbom, Erik Granseth, Leo Gumpert, Inger Johannisson, Jesper Lorentz,
Lotta-Karin Nyström, Niklas Näsström, Linda Wiese and Estrella Zarate
Also participating in the preparation of the report: Atosa Anvarizadeh, Anette Boberg and
Annika Koponen
Graphic production: Markus Andersson, Linnea Lantz and Arvid Sondén
Photo: Daniel Roos
Cover: Hanna Linnér and Anna Sköld
Swedish Pensions Agency
P.O. Box 38190
SE-100 64 Stockholm, Sweden
Telephone: +46 771-771 771
E-mail: registrator@pensionsmyndigheten.se
About Orange Report
4

1.
Results of the Pension System in Brief
The national income-based pension system in Sweden consists of
inkomstpension and premium pension. The inkomstpension and premium
pension are defined-contribution, financially stable pension systems. Given
this design, liabilities and assets normally change in equal measure; in other
words, each year net income is more or less equal to zero. In principle, this
is always true of the premium pension system, while inkomstpension allows
substantial differences between liability and asset development from year to
year, providing that accumulated deficits are not allowed to remain in the
system. In this report, inkomstpension also includes ATP pension, which is a
defined benefit scheme.
The inkomstpension system is a pay-as-you-go system, and pension
contributions paid in are used to pay retirees in the same year. The surpluses
or deficits resulting from pension contributions being higher or lower than
pension disbursements are managed by the First–Fourth National Pension
Funds, which together with the Sixth National Pension Fund form the buffer
fund.
The assets of the system are the value of future pension contributions,
referred to as the contribution asset, and the buffer fund. The contribution
asset is calculated as follows: contribution revenues are multiplied by the
expected average time that one krona will remain in the pension system,
referred to as turnover duration.
The pension liability consists partly of a liability to the economically active
and partly of a liability to retirees. The liability to the economically active is
mainly the sum of the pension balances of everyone (the last row in the
account statement of everyone’s Orange Envelope). The pension liability to
retirees is the expected total of all pensions paid to today’s pensioners for
the rest of their lives. The pension liability changes primarily with the
annual indexation of pensions and pension account balances. Indexation is
determined by the change in the average income in Sweden, in combination
with the balance ratio in years when balancing is activated.
The result of the inkomstpension system is affected by numerous key
economic and demographic factors. In the short run the development of
employment is the most important factor, but the effect of the stock and
Inkomstpension net income in 2020 was SEK 48 billion and the balance ratio was
1.0824, that is, assets exceeded liabilities 8.24 percent or SEK 806 billion.
The value of pension savers’ and pensioners’ premium pension assets on December
31, 2020 amounted to SEK 1,583 billion, while the value in temporary management
was SEK 42 billion. The increase in value for fund insurance was 6.4 percent in
2020.
The two parts of the national income-based pension system
Inkomstpension
5

bond markets on the buffer fund is also of significance, particularly in case
of major changes. In the long run demographic factors are most important.
The result for 2020 was SEK 48 billion. Together with a capital surplus of
SEK 758 billion from 2019, this yields a capital surplus of SEK 806 billion
at the end of 2020. The result for the year is by definition due to assets
increasing more than liabilities in 2020. Assets exceed liabilities by just
over 8 percent. The system’s balance ratio for the financial and calculation
year 2020 is calculated at 1.0824. The system is not in a balancing period,
and therefore the balance ratio will not affect the indexation of pensions and
pension balance for the (balancing) year 2022.
Assets in 2020 increased over the year by SEK 377 billion (3.7 percent).
Contribution assets increased by SEK 277 billion (3.2 percent). The value of
the change in turnover was SEK 94 billion and the value of the change in
contribution revenue was SEK 183 billion. The return on funded capital of
the buffer fund was SEK 133 billion (8.3 percent).
The year 2020, like 2019, was a year when pension disbursements, fund
expenses and administrative costs exceeded pension contributions in the
inkomstpension system. The difference, primarily net lending , produced a
negative contribution of SEK 33 billion.
Pension liability in 2020 increased by almost SEK 329 billion
(3.5 percent). The liability increases with new contributions as these give
rise to future pensions. Similarly, the liability decreases with pension
disbursements, which can be seen as an amortisation. The liability increases
with the allocation of inheritance gains but decreases with the amount of
inheritance gains received. The cost of administration reduces the insured’s
assets and hence the liability. The net result of the above was a reduction in
liability of SEK 21 billion.
Liability recalculation, indexation, increased liability to the gainfully
employed by SEK 340 billion. Liability to pensioners is affected by changes
in average life expectancy. Compared to 2019, the average expected payout
duration (economic life expectancy) for a 65-year-old increased from 16.77
to 16.81 years, or by just over 16 days. The reason why economic life
Table 1.1 Assets and Liabilities of the Inkomstpension System, Financial Years 2015–2020
billions of SEK
Calculation year
2015
2016
2017
2018
2019
2020
Balancing year
2017
2018
2019
2020
2021
2022
Buffer fund
1,230
1,321
1,412
1,383
1,596
1,696
Contribution asset
7,457
7,737
7,984
8,244
8,616
8,893
Total assets
8,688
9,058
9,396
9,627
10,213
10,589
Pension liability
8,517
8,714
9,080
9,165
9,454
9,783
Surplus/Deficit
171
344
315
463
758
806
Balance ratio
1.0201
1.0395
1.0347
1.0505
1.0802
1.0824
Damped balance
ratio
1.0067
1.0132
1.0116
1.0168
1.0267
1.0275
1
6

expectancy has increased despite the coronavirus pandemic is that a three-
year average is used, and economic mortality was higher in 2017 than in
2020. The increased expected payout duration in itself meant that liability
increased by SEK 10 billion.
The premium pension system is a funded system where pension savers and
pensioners themselves choose the funds in which to invest their premium
pension moneys. The pension is disbursed from the proceeds of selling off
accumulated capital. The assets consist of the investments in funds by
pension savers and pensioners. The pension liability to the economically
active and to retirees is related primarily to fund shares. Changes in the
value of fund shares affect the assets of pension savers and pensioners in the
system, directly and to an equal degree. With traditional insurance, the
pension liability is the value of the remaining guaranteed disbursements.
That value is calculated with assumptions about future return, life
expectancy and operating costs. In the premium pension system all
payments in and out of the system and all changes in value have in principle
the same effect on system assets and liabilities. The system’s positive
balance belongs to the pension savers and pensioners and is placed in the
consolidation fund in equity. Moneys in the traditional insurance
consolidation fund are paid out as a capital bonus when pensions are paid.
Moneys in the consolidation fund for fund insurance are deducted from the
following year’s contributions to cover operational costs.
The value of the premium pension assets of pension savers and pensioners
on December 31, 2020 amounted to 1,583 billion, while the value in
temporary management was SEK 42 billion. The increase in value for fund
insurance was 6.4 percent in 2020.
Profit for the year 2020 amounted to SEK 2,829 million. The result for the
entire insurance business deteriorated by SEK 2,727 million. This is mainly
explained by the positive return on capital in traditional insurance this year
amounting to SEK 61.7 million, compared to 2019 when the return was
SEK 4,335 million. The increase in value of other investment assets
amounted to SEK 2,243.5 million, which is an increase of
SEK 336.5 million. Insurance benefit payments increased by
SEK 250 million and amounted to SEK 1,682 million (1,432).
Operating costs amount to SEK 535.9 (578.5) million and have thus
decreased by SEK 42.5 million. The cost of purchased services decreased
and is mainly due to the purchase of IT services, administrative services,
consultancy costs decreased in 2020.
Premium Pension
7

Assets in 2020 increased by SEK 133 billion during the year. The change in
insurance assets refers in principle to newly earned pension credit, positive
change in value, allocated management fees and payment of pensions as
mentioned above.
The pension liability in 2020 increased by SEK 133 billion. The change in
pension liability refers principally to the same newly earned pension credit,
positive change in value, allocated management fees and payment of
pensions as mentioned above.
Table 1.2 Assets and Liabilities of the Premium Pension System, 2015–2020
millions of SEK
2015
2016
2017
2018
2019
2020
Insurance assets
Fund insurance
841,332
962,304
1,113,510
1,105,809
1,461,732
1,583,021
Traditional insurance
20,784
26,029
30,745
35,240
46,431
53,380
In temporary
management
34,260
36,034
37,478
39,120
40,886
41,568
Total Insurance
assets
896,376
1,024,367
1,181,733
1,180,169
1,549,049
1,677,969
Pension liability
889,386
1,015,464
1,170,466
1,177,423
1,539,635
1,668,334
Net income/loss
for the year
1,003
2,686
3,213
1,339
5,556
2,829
8

Footnotes
1. Primarily because the return on invested capital is missing from financial
savings. Primary net lending essentially refers to the difference between
contributions and disbursements in the inkomstpension system.
9

2.
Income Statement and Balance Sheet
Table 2.1 Income Statement
millions of SEK
Note
2019
2020
Change
Change in fund assets
Pension contributions
1
289,386
295,499
6,113
Pension disbursements
2
-314,724
-326,266
-11,542
Return on funded capital
3
240,318
132,722
-107,596
Costs of administration
4
-1,757
-1,856
-99
Total Change in fund assets
213,223
100,099
-113,124
Change in contribution asset
Value of change in contribution
revenue
5
331,755
182,990
-148,765
Value of change in turnover duration
6
40,243
93,798
53,555
Total Change in contribution asset
371,998
276,788
-95,210
Change in pension liability
New pension credit
7
-302,495
-304,394
-1,899
Pension disbursements
2
314,724
326,257
11,533
Indexation
8
-268,855
-339,735
-70,880
Value of change in life expectancy
9
-31,559
-10,503
21,056
Inheritance gains arising
10
12,633
12,135
-498
Inheritance gains distributed
10
-15,697
-14,598
1,099
Deduction for costs of administration
11
1,673
1,818
145
Total Change in pension liability
-289,576
-329,020
-39,444
Net income/-loss for the year
295,645
47,867
-247,778
a. In the Pension Agency’s annual report for 2020, the preliminary return was SEK 132,721 million.
b. A negative item (-) increases the pension liability, and a positive item decreases it, by the amount shown.
a
b
Inkomstpension, Income statement and Balance sheet
10

Table 2.2 Balance sheet
millions of SEK
Note
2019
2020
Change
Assets
Fund assets
12
1,596,342
1,696,441
100,099
Contribution assets
13
8,616,216
8,893,004
276,788
Total Assets
10,212,558
10,589,445
376,887
Liabilities and results brought forward
Closing results brought forward
Opening results brought forward
462,685
758,330
295,645
Net income/-loss for the year
295,645
47,867
-247,778
Total Closing results brought forward
758,330
806,197
47,867
Pension liability
14
9,454,228
9,783,248
329,020
Total Liabilities and results 
brought forward
10,212,558
10,589,445
376,887
a. In the Pension Agency’s annual report for 2020, the preliminary value of fund assets was SEK 1,696,440
million.
a
Table 2.3 Income Statement
millions of SEK
Note
2019
2020
Change
Change in fund assets
Pension contributions
45,140
45,727
587
Pension disbursements
15
-10,942
-14,028
-3,086
Return on funded capital
16
341,911
101,787
-240,124
Costs of administration
17
-597
-444
153
Total Change in fund assets
375,512
133,042
-242,470
Change in pension liability
New pension credit
18
-45,140
-45,727
-587
Pension disbursements
15
10,942
14,028
3,086
Change in value
16
-336,233
-99,022
237,211
Inheritance gains arising
19
3,700
4,135
435
Inheritance gains distributed
19
-3,700
-4,135
-435
Deduction for costs of administration
20
474
508
34
Total Change in pension liability
-369,956
-130,213
239,743
Net income/-loss for the year
5,556
2,829
-2,727
a. A negative item (-) increases the pension liability, and a positive item decreases it, by the amount shown.
a
Premium Pension, Income statement and Balance sheet
11

Table 2.4 Balance sheet
millions of SEK
Note
2019
2020
Change
Assets
Insurance assets
Fund insurance
21
1,461,732
1,583,021
121,289
Traditional insurance
21
46,431
53,380
6,949
Temporary management
21
40,886
41,568
682
Total Insurance Assets
1,549,049
1,677,969
128,920
Other assets
22
7,348
11,093
3,745
Total Assets
1,556,397
1,689,062
132,665
Liabilities and results brought forward
Closing results brought forward
Opening results brought forward
11,206
15,775
4,569
Net income/-loss for the year
5,556
2,829
-2,727
Total Closing results brought forward
23
16,762
18,604
1,842
Liabilities
Pension liability
24
1,532,161
1,659,599
127,438
Other liabilities
25
7,474
10,859
3,385
Total Liabilities
1,539,635
1,670,458
130,823
Total Liabilities and results 
brought forward
1,556,397
1,689,062
132,665
a. Opening results brought forward differs from Closing results brought forward last year, see Note 23.
a
12

Table 2.5 Income Statement
millions of SEK
2019
2020
Change
Change in fund assets
Pension contributions
334,526
341,226
6,700
Pension disbursements
-325,666
-340,294
-14,628
Return on funded capital
582,229
234,509
-347,720
Costs of administration
-2,354
-2,300
54
Total Change in fund assets
588,735
233,141
-355,594
Change in contribution asset
Value of the change in contribution
revenue
331,755
182,990
-148,765
Value of change in turnover duration
40,243
93,798
53,555
Total Change in contribution asset
371,998
276,788
-95,210
Change in pension liability
New pension credit
-347,635
-350,121
-2,486
Pension disbursements
325,666
340,285
14,619
Indexation
-605,088
-438,757
166,331
Value of the change in life expectancy
-31,559
-10,503
21,056
Inheritance gains arising
16,333
16,270
-63
Inheritance gains distributed
-19,397
-18,733
664
Deduction for costs of administration
2,147
2,326
179
Total Change in pension liability
-659,533
-459,233
200,300
Net income/-loss for the year
301,200
50,696
-250,504
a. A negative item (-) increases the pension liability, and a positive item decreases it, by the amount shown.
a
Inkomstpension and Premium Pension, Income statement and
Balance sheet
13

Table 2.6 Balance sheet
millions of SEK
2019
2020
Change
Assets
Fund assets
1,596,342
1,696,441
100,099
Insurance assets
1,549,049
1,677,969
128,920
Other assets
7,348
11,093
3,745
Contribution assets
8,616,216
8,893,004
276,788
Total Assets
11,768,955
12,278,507
509,552
Liabilities and results brought forward
Closing results brought forward
Opening results brought forward
473,891
774,105
300,214
Net income/-loss for the year
301,201
50,696
-250,505
Total Closing results brought forward
775,092
824,801
49,709
Liabilities
Pension liability
10,986,389
11,442,847
456,458
Other liabilities
7,474
10,859
3,385
Total Liabilities
10,993,863
11,453,706
459,843
Total Liabilites and results 
brought forward
11,768,955
12,278,507
509,552
a. Opening results brought forward differs from Closing results brought forward last year, see Note 23.
a
14

3.
Accounting Principles
The Annual Report of the Pension System has been prepared in accordance
with Chapter 55 § 4 of the Social Insurance Code (2010:110) on the
Earnings Related Old Age Pension (SFB) and Regulation (2002:135)
Annual Reporting of the Financial Position and Development of the Old-
Age Pension System.
The income-related old-age pension system includes the benefits provided
by the inkomstpension, the ATP and the premium pension.  The
inkomstpension and the ATP are examples of benefits in a pay-as-you-go
pension system. In such systems, contributions are not funded, but in
principle are used directly to finance pension disbursements. The National
Pension Funds are buffer funds that absorb differences between the inflow
of contributions and the outflow of pensions. As elsewhere in the accounts,
the term “inkomstpension” is used here in reference to the entire pay-as
you-go system; in other words, it often applies to the ATP as well.
According to Chapter 58 § 14 SFB, the reported assets of the pay-as-you-go
system consist of the contribution asset and the value of the assets of the
First–Fourth and Sixth National Pension Funds. Formulas for calculating the
contribution asset and the pension liability of the inkomstpension system are
provided in the Regulations for Calculation of the Balance Ratio
(2002:780). These formulas are also found in Appendix B.
In this year’s report, the Pensions Agency has revised a formula to bring it
in line with the increase in the minimum withdrawal age from 61 to 62. This
revision concerns the variable 
, change of pension disbursements due to
death, which is calculated on the basis of pension disbursements per birth
year. With the increase in the pension withdrawal age, there will be no
pensioners age 61 at the end of 2020, and the Pensions Agency therefore
considers that 
 be set at 1 for the age group, which means that the variable
, proportion of remaining disbursements, is set to 1 for age 61 in the same
way that it was set to 1 for age 60 in previous years.
The premium pension system is a fully funded pension system where
contributions are invested and the proceeds of selling accumulated capital
are used to pay pensions.
The data on the financial position of the inkomstpension have been presented
previously in the annual report of the Swedish Pensions Agency. Information
concerning the premium pension has also been presented previously in the annual
report of the Pensions Agency. The audit of the information in the balance sheet and
income statement is performed in connection with the confirmation of the Pensions
Agency’s annual report. The Annual Report of the Swedish Pension System – the
Orange Report – provides essentially the same information concerning income
statement, balance sheet and notes as that published in the Swedish Pensions
Agency’s Annual Report. However, certain adjustments and simplifications of the
information on the premium pension have been made to facilitate comparisons
between the two systems.
1
he
he
L∗
Regulations and Guidelines
15

According to the Regulations for the Annual Report (2002:135), the Orange
Report is to include a projection of the assumed long-term development of
the pension system. See chapter 7 Three Scenarios for the Future of the
Pension System.
The accounting principles of the National Pension Funds are set forth in
their annual reports and are therefore not described in this report. The
annual report of each national pension fund is available on the home page of
the respective fund: www.ap1.se, www.ap2.se, www.ap3.se, www.ap4.se
and www.ap6.se. As the annual report of the Swedish Pensions Agency
describes the accounting principles used for the premium pension, these are
only presented in summary form in this report.
The accounting for the inkomstpension system is based on data from the
records of the Swedish Pensions Agency on pension credit earned and
pension disbursements, respectively.
In the Annual Report of the Swedish Pension System, information on the
operations of the First–Fourth and Sixth National Pension Funds has been
taken primarily from the annual reports of the respective funds.  The buffer
funds prepare their annual reports according to the Law on National Pension
Funds (2000:192). Furthermore, on the basis of applicable provisions for
comparable financial companies, the funds have developed common
principles for accounting and valuation.
In the Annual Report of the Swedish Pension System, information on the
premium pension has been taken from the annual report of the Swedish
Pensions Agency, which was prepared as provided in Regulation (2000:605)
on Annual Reports and Supporting Documentation for Budgeting. Invested
assets (and the corresponding liabilities) of the premium pension system
have been valued according to the provisions of the Law (1995:1560) on
Annual Reports of Insurance Companies and according to the regulations
and general guidelines of the Swedish Financial Supervisory Authority for
Annual Reports of Insurance Companies. The assets and liabilities of the
premium pension systems are included in the consolidated balance sheet of
the Swedish Pensions Agency, and the operations of the premium pension
system are reported in a separate section of the income statement. Certain
revisions, simplifications and consolidations have been made to facilitate
comparison between the presentation and that of the inkomstpension.
Assets and liabilities included in the temporary management of pension
contributions are reported in the annual report of the Swedish pension
system as an insurance asset and pension liability. This is a deviation
compared to the Swedish Pensions Agency annual report.
The assets and liabilities are valued mainly on the basis of events and
transactions that are verifiable at the time of valuation. For example, the fact
that contribution revenue normally changes at the rate of economic growth
is not considered in the calculation of the contribution asset. Nor is
consideration given in the valuation of the pension liability to the fact that
2
Where Do the Figures Come From?
Principles for Valuation of Assets and Liabilities
16

pension disbursements, through indexation and other factors, will change in
the future.
Through the design of the inkomstpension, there is a strong link between the
development of the system’s assets and liabilities, respectively. When
balancing is activated, there is basically an absolute link between the
respective rates of change in liabilities and in assets.
The way in which the assets and liabilities of the inkomstpension system are
valued is based on the assumption that these will change at the same rate
after each valuation. To put it another way, the method of valuation is based
on the assumption that the system’s future internal rate of return will be the
same as the future change in the value of the pension liability, even though
this is certain only if balancing is activated. When balancing is not
activated, the internal rate of return may be either greater or less than the
change in the value of the pension liability.
The valuation of the contribution flow and the pension liability is based
almost exclusively on conditions prevailing at the time of valuation. This is
not due to any belief that all these factors will remain totally constant.
Rather, the accounting is designed not to include changed conditions until
the changes are reflected in the events and transactions on which the
accounting is based.
The basis for valuation of the contribution asset is the size of the pension
liability that the contribution revenue for the accounting year – i.e. paid-in
pension contributions – could finance if the conditions prevailing at the time
of valuation remained constant. The relevant determinants here, in addition
to the rules of the pension system, are economic and demographic. The
economic conditions consist of the average pension-qualifying income of
each annual birth cohort and the sum of these incomes. The demographic
factors relate to mortality at different ages. The relevant rules for the
pension system are those that govern the calculation and the indexation of
the inkomstpension, define the contribution and pension base and determine
the contribution in percent. The contribution asset is calculated by
multiplying the financial year’s contribution revenue by the previous year’s
turnover duration.  Turnover duration expresses how long it takes, on
average, from the payment of SEK 1 in revenue into the system to the
disbursement of a pension based on the pension credit arising at the time the
pension credit was earned. Thus, turnover duration reflects the age
difference between the average pension contributor and the average
pensioner that would result if the economic, demographic and legal
conditions were constant. If turnover duration increases it means the value
of contribution flow increases and vice versa.
The assets of the National Pension Funds are valued at their so-called true
value. This means that the assets are valued preferably at their latest price
paid on the final trading day of the year, otherwise at their latest price bid.
3
4
Valuation of Inkomstpension Assets
17

The liability of the inkomstpension to persons who have not begun to draw
an old-age pension is valued as the sum of the pension balances of all
insured persons. Income earned in the year covered by the accounts has not
yet been confirmed at the time of the report. For this reason, an estimate of
the inkomstpension credit earned in the year of the report is added to the
sum of the pension balances of the insured. This added amount equals about
three percent of the total pension liability. The difference between estimated
and confirmed pension credit is deducted in the accounts for the following
year.
The pension liability to retirees is calculated by multiplying the pensions
granted (annual amount) by the expected number of years for which the
amount will be disbursed. The number of years is discounted in order to
reflect the indexation of disbursed amounts by the increase in the income
index or balance index with a reduction of 1.6 percentage points.
The expected number of pay-out years is calculated from measurements of
the pay-out period of pension amounts according to Swedish Pensions
Agency’s records and is expressed in terms of so-called economic annuity
divisors.  An average of the preceding three years’ economic annuity
divisor is used in the calculation of the pension liability. The financial
breakdowns take into account any correlation between the size of the
pension amount and the length of time it is paid. For more details, see the
report “VER 2016-390 Payment Age and Economic Annuity Divisors”. In
the years for which a balance index has been established the liability to
pensioners is multiplied by the damped balance ratio established for the year
.
Since 2018, it is no longer possible to earn ATP pension. The ATP pension
liability to those who have not yet begun to withdraw old-age pension can
thus be calculated without assumptions concerning future economic and
demographic developments. Since 2019, the liability is valued as if ATP
pension as yet unclaimed had been claimed in December of the current
reporting year. The liability is calculated by calculating a ATP pension
amount for each individual, taking into account age, which is then
multiplied by the number of years the amount is expected to be paid out (the
economic annuity divisor).
Premium pension assets are reported at their true value, or accrued
acquisition cost, according to the regulations and general guidelines of the
Swedish Financial Supervisory Authority (FFFS 2009:12) on Annual
Reports of Insurance Companies. Assets reported at their true value as of the
balance sheet date are valued at their price on the last trading day of the
year. In the valuation of assets reported at accrued acquisition cost, the
difference between acquisition cost and redemption price is periodized as
interest revenue for the time remaining to maturity.
Temporary management consists of pension contributions paid in
periodically during the year in which pension credit is earned; these are
transferred to the premium pension system when the pension credit for the
5
6
7
t + 1
Valuation of Inkomstpension Liabilities
Valuation of Premium Pension Assets and Liabilities
18

year has been confirmed. Assets under temporary management are reported
at their accrued acquisition value.
Fund insurance assets refer to pension savers’ investment in funds and are
reported at the redemption price for fund assets. The pension liability for
fund insurance consists of fund insurance assets and of liquid assets not yet
converted into fund shares. Traditional insurance assets are invested in
equity and interest funds and are reported at their true value.
The pension liability for traditional insurance with profit annuity is
determined for each insurance policy as the capital value of the remaining
guaranteed disbursements. That value is calculated on assumptions about
future returns, life expectancy and operating expenses. The return consists
of an aggregation of the market interest rate on government bonds and
guaranteed mortgage bonds of varying maturities. The market rate of
interest is determined on the basis of the time remaining to maturity for
guaranteed disbursements. The market valuation of the liability means that
provisions set aside for life insurance are affected by changes in interest
rates. Paid-in premiums are reported as lump-sum premiums and increase
the guaranteed amount. Assumptions about life expectancy are based on
Statistics Sweden’s population forecast from 2015, where mortality has been
reduced by 10 per cent in order to better match mortality observed in the
Swedish Pensions Agency’s stock. Operating expenses are assumed to be
0.1 percent of the insurance capital. Taken together, this means guaranteed
commitments in traditional insurance have been valued carefully in
accordance with established actuarial methods.
19

Footnotes
1. The guaranteed pension, which is part of the national public pension, is not
income-based but charged to the national budget. The guaranteed pension is
therefore not included in the accounting.
2. The accounting of the inkomstpension system in the annual report of the
Swedish Pensions Agency for 2020 is based on preliminary information in
regard to the operations of the National Pension Funds.
3. With the method for calculating turnover duration, there is an implied
assumption that the size of the economically active population will remain
constant. If the population decreases, there is consequently a risk that the
accounts will (somewhat) overestimate the system’s assets in relation to its
liabilities. It is reasonable to take for granted, however, that the population
decrease will end at some point. If events take this course, the
underestimation, and the possible resulting deficit in the buffer fund, will be
temporary. The buffer fund will in time return to a level of at least SEK zero.
4. The calculation of turnover duration is described in Appendix B, Formula
B.3.1.
5. See Note 14, Table 8.21 A.
6. The recalculation of inkomstpension is made using the ratio between the new
and old income index divided by 1.016. For those years when balancing is
activated, the income index is replaced by the balance index.
7. See formula B.7.5 in Appendix B.
20

4.
How the National Pension System Works
The national pension system works much like ordinary saving at the bank.
The comparison applies to both earnings-related parts of the system, the
inkomstpension and the premium pension. Each year pension contributions
are paid by the insured, their employers and in certain cases the central
government. Contributions are paid into two separate accounts, one for
inkomstpension and one for premium pension. Savings grow through the
years in line with the contributions paid and the ‘interest rate’ applicable to
each account. The statement sent out each year in the Orange Envelope
enables the insured to watch their own inkomstpension and premium
pension accounts develop from year to year. When the insured individual
retires, the stream of payments is reversed, and the inkomstpension and
premium pension are disbursed for the remaining lifetime of the insured.
With pension insurance savings are blocked; it is impossible to withdraw all
or any part of them before the minimum age for receiving a pension.
Inkomstpension and premium pension can be claimed first at age 62.
One purpose of pension insurance is to redistribute assets from individuals
with shorter-than-average life spans to those who live longer. The pension
balances of deceased persons – so-called inheritance gains (see Appendix
A) – are redistributed each year to the surviving insured in the same birth
cohort. Also after pension withdrawal begins, assets are redistributed from
those with shorter-than-average life spans to those who live longer. This is
done by basing the monthly pension on average life expectancy but
disbursing it for as long as the insured lives. Consequently, total pension
disbursements to persons who live for a relatively short time after retirement
are less than their pension savings, and those who live longer than average
receive more than the value of their own pension savings.
The balance of an insured’s pension account consists of the sum of her/his
pension credit (contributions), accrued interest and inheritance gains. A
charge for administrative costs is deducted from the account each year.
The principles of the inkomstpension and the premium pension are simple. A portion
of your earnings each year is set aside in two different accounts. The pension is
calculated on the basis of the amount of money you have in your account when you
claim your pension, and how many more years you are expected to live from that
point onwards.
The purpose of this section is to provide those who so desire with
somewhat more advanced knowledge than these elementary basic premises.
Almost Like Saving at the Bank …
… but Entirely a Form of Pension Insurance
21

The pension contribution is 18.5 percent of the pension base. The pension
base consists of pension-qualifying income and pension-qualifying amounts.
In addition to earnings, benefits from the social insurance and
unemployment insurance systems are treated as income. Pension-qualifying
amounts are a basis for calculating pension credit but are not income,
properly speaking. Pension credit is granted for pension-qualifying amounts
for sickness and activity compensation (disability pension), years with small
children (child-care years), and studies. Up until 2010, pension-qualifying
amounts were also granted for compulsory national service. As of 2018 it
can be received again when compulsory military service is reintroduced.
The maximum pension base is 7.5 income-related base amounts
(SEK 501 000 in 2020). Pension credit is earned at 16 percent of the pension
base for the inkomstpension and 2.5 percent for the premium pension.
The insured pays an individual pension contribution to the national public
pension of 7 percent of her/his earnings and any benefits received from the
social insurance and/or unemployment insurance schemes. The contribution
is paid on incomes up to 8.07 income-related base amounts  and is paid in
together with the withholding tax on earnings. The individual pension
contribution of 7 percent is not included in the pension base. Annual
earnings are pension-qualifying when they exceed the minimum income for
the obligation to file a tax return, which as from 2003 is 42.3 percent of the
current price-related base amount.  When an individual’s income has
exceeded this threshold, it is pension-qualifying from the first krona. Since
the individual receives a tax deduction for national public pension
contributions on their tax returns, it can be seen as the state paying the
national public pension contribution.
For each employee, employers pay a pension contribution of 10.21 percent
of that individual’s earnings.  This contribution is also paid on earnings
exceeding 8.07 income-related base amounts. Since there is no pension
credit for earnings above 8.07 income-related base amounts, these
contributions are in fact a tax. They are therefore allocated to the central-
government budget as tax revenue rather than to the pension system.
For recipients of pension-qualifying social insurance or unemployment
insurance benefits, the central government pays a contribution of
10.21 percent of these benefits to the pension system. For persons credited
with pension-qualifying amounts, the central government pays a
contribution of 18.5 percent of the pension-qualifying amount to the pension
system. These central government contributions to the old-age pension
system are financed by general tax revenue.
The total pension contribution is thus 17.21 percent, whereas the pension
credit and the pension contribution are 18.5 percent of the pension base. The
reason for the difference is that the contribution base is reduced by the
individual pension contribution of 7 percent when pension credit is
calculated.  This means that the maximum pension base is 93 percent of
8.07, or 7.5 income-related base amounts. The maximum pension credit in
2020 was SEK 92,685.
1
2
3
4
5
6
One Krona of Pension Credit for Each Krona Contributed
Who Pays the Contribution?
22

Of the pension contribution of 18.5 percent, 16 percentage points are
deposited in the four buffer funds of the inkomstpension system: the First,
Second, Third and Fourth National Pension Funds.  Each fund receives one
fourth of contributions and finances one fourth of pension disbursements.
The monthly pension disbursements of the inkomstpension system thus
come from the buffer funds. In principle, the same moneys that were paid in
during the month are paid out in pensions to retirees.
The moneys allocated to the premium pension, 2.5 percent of the pension
base, are invested in interest-bearing assets until the final tax settlement.
Only then can it be determined how much pension credit for the premium
pension has been earned by each insured. When pension credit has been
confirmed, shares are purchased in the funds chosen by the insured. For
those who have not chosen a fund, their moneys will be invested in the
Seventh National Pension Fund, AP7 Såfa, the government pension
management alternative based on birth cohorts, which has a generation-fund
profile, including AP7. At the turn of the year 2020/2021, there were 486
funds in the premium pension system, administered by 65 different fund
management companies. With each disbursement of pensions, enough fund
shares are sold to provide the monthly amount.
Savings in a bank account earn interest, and the national public pension
works in the same way. The interest on the inkomstpension account is
normally determined by the growth in average income. Average income is
measured by the income index (see Appendix A). The equivalent of interest
on the premium pension account is determined by the change in the value of
the premium pension funds chosen by the insured.
Thus, the interest earned on pension credit depends on the development of
different variables in the general economy. The inkomstpension account
earns interest at the rate of increase in incomes. The development of the
premium pension account follows the tendency on financial markets, which
among other things reflects the price of capital. Neither of these rates of
interest is guaranteed; they may even be negative. Through apportionment
of contributions to separate subsystems where the rate of return depends on
somewhat differing circumstances, risks are spread to some extent. The
average return of the inkomstpension system (income-/balance index) has
7
Table 4.1 Funds in the Premium Pension System in 2020 and Capital Managed 2016–2020
December 31, billions of SEK
Number of registered
funds 2020
Managed capital
2016
2017
2018
2019
2020
Equity funds
346
388
441
407
517
582
Mixed funds
37
69
70
66
69
65
Generation funds
28
147
166
167
209
221
Interest funds
74
127
26
30
31
31
AP7 Såfa/Premium Savings Fund
1
328
407
433
632
680
Total
486
959
1,110
1,103
1,458
1,579
8
Where Does the Contribution Go?
Interest on Contributions That Gave Rise to Pension Credit
23

been 3.1 percent since 1995.  During the same period, the Premium Pension
system has generated an annual rate of return of 7.7 percent.
Under certain demographic and economic conditions, it is not possible to
earn interest on the inkomstpension account and the inkomstpension at a
rate equal to the growth in average income and at the same time to finance
payments of the inkomstpension with a fixed contribution. In order to
maintain the contribution rate at 16 percent, income indexation must be
suspended in such a situation. This is done by activation of balancing.
The assets of the system divided by the pension liability provides a measure
of its financial position, a ratio referred to as the balance ratio (balanstalet,
BT). If the balance ratio is greater than the number one, assets exceed
liabilities. If the balance ratio is less than one, liabilities exceed assets, and
balancing is activated. When balancing is activated, pension balances and
pensions are indexed by the change in a balance index instead of the change
in the income index. The change in the balance index is determined by the
change in the income index and the size of the balance ratio.
An example : If the balance ratio falls below 1.0000 to 0.9900 while the
income index increases from 100.00 to 104.00 the damped balance ratio is
first calculated according to: 
.
By multiplying the income index (104.00) by the damped balance ratio
(0.9967) the balance index 103.66 is obtained.  The indexation of pension
balances is thus 3.66 instead of 4 percent. Indexation of pensions is reduced
to the same extent.
If the balance ratio exceeds 1.0000 during a period when balancing is
activated, pension balances and pensions will be indexed at a rate higher
than the increase in the income index. When the balance index reaches the
income index level, balancing is turned off. Pensions then regain the value
they would have had if they had been indexed using the income index alone.
The system returns to indexing based solely on changes in the income index.
A schematic description is given in Figure 4.1.
8
​ +
3
0.9900−1
1 = 0.9967 9
10
A Rate of Interest Other Than the Income Index – Balancing
24

The costs of administering the inkomstpension are deducted annually from
pension balances through multiplication of these balances by an
administrative cost factor (see Appendix A). This deduction is made only
until the insured begins to draw a pension. At current cost levels, the
deduction for costs will reduce the inkomstpension by approximately
1 percent compared to what it would have been without the deduction.
Similarly, the costs of administration and fund management in the premium
pension system are deducted from premium pension capital. In this case,
however, the deduction continues to be made after the insured begins to
draw a pension. On average, the cost was 0.21 percent of premium pension
capital in 2020. At this level of costs, the deduction for administrative costs
will reduce the premium pension by an average of about 8 percent from
what it would have been without any cost deduction. In order to reduce the
costs of pension savers, capital managers associated with the premium
pension system are required to grant a rebate on the ordinary expenses of the
funds. The rebates to pension savers in 2020 are equivalent to a reduction in
fund management fees of about 0.35 percentage points. Without the rebate,
the premium pension would be about 12 percent lower.
Figure 4.1 Balancing – Concept description
Pensions Reduced by Costs of Administration
25

The inkomstpension is calculated by dividing the balance of the
inkomstpension account by an annuity divisor (see Appendix A) at the time
of retirement. The annuity divisors are specific to each cohort and reflect
partly the remaining life expectancy at the age pension is drawn and partly
an advance interest of 1.6 percent. Remaining life expectancy is an average
for men and women. The advance interest of 1.6 percent makes the annuity
divisor lower than average life expectancy and thus initial pension is higher
than it would have been without the interest.
An example: a person who retires at age 65 has a remaining life expectancy
of about 20 years. The advance interest of 1.6 percent causes the annuity
divisor to drop to 17.07. If the person has SEK 3 million in their
inkomstpension account, the person receives SEK 175,700 per year
(3 million/17.07) in inkomstpension or SEK 14,646 per month.
The inkomstpension is recalculated annually according to the change in the
income index after deducting the advance interest of 1.6 percentage points
credited in the annuity divisor, so-called adjustment indexation.  This
means that if the income index increases by exactly 1.6 percent more than
inflation, as measured by the Consumer Price Index, pensions will increase
at exactly the same rate as inflation. If the income index increases by more
than 1.6 percent above the inflation rate, pensions will rise in constant
prices, and vice versa. When balancing is activated, the income index is
replaced by the balance index when pensions are recalculated.
The premium pension can be drawn either as traditional insurance with
profit annuity or fund insurance. In both forms of insurance, the value of the
pension account is divided by an annuity divisor, in the same way as with
the inkomstpension. But for the premium pension, unlike the
inkomstpension, the annuity divisor is based on forecasts of future life
expectancy. The advance interest rate is currently 1.75 percent for both fund
and traditional insurance, and a deduction for future costs of 0.1 percent is
included in the calculation of the annuity divisors.
Fund insurance means that the pension savings remain in the premium
pension funds chosen by the insured. With fund insurance, the amount of the
premium pension is recalculated once each year based on the value of fund
shares in December. Each month, a sufficient number of fund shares are sold
to finance payment of the calculated premium pension. If the value of the
fund shares increases, fewer shares are sold; if it decreases, more shares are
sold. Variations in prices of fund shares affect the value of the following
year’s premium pension.
Drawing premium pension in the form of traditional insurance means that
the pension is calculated as a lifetime guaranteed nominal monthly amount
and an additional amount varying in size from year to year. In the event of a
transition to traditional insurance, the insured’s fund shares are sold and the
Swedish Pensions Agency assumes responsibility for the management of the
assets.
11
The Different Parts of the National Public Pension
How is the Inkomstpension Calculated?
How Is the Premium Pension Calculated?
26

The premium pension may include a survivor benefit for the period of
disbursement. This means that the premium pension will be paid to either of
two spouses or cohabitants as long as one of them survives. If survivor
benefit is chosen, the monthly pension will be lower because premium
pension payment is expected to last longer.
Since 2018, fund managers are required by law to report on their
sustainability efforts by indicating, inter alia, the methods they use and
how
they follow up their sustainability efforts. The Pensions Agency requires at
the minimum that fund managers be signatories to the UnitedNations
Principles for Responsible Investments (UN PRI). The Agency offers
pension savers a range of tools to make it easy for them to choose
sustainable funds on the premium pension market.
In 2020, the Pensions Agency examined in its sustainability report the
extent to which pension savers actively make sustainable fund choices.
Also
in 2020, the premium pension fund market was prepared for imminent
implementation of the EU Sustainable Finance Disclosure Regulation
(Regulation (EU) 2020/852) which regulates, inter alia, how fund
management companies, insurance companies, and financial advisors should
inform investors and clients about environmental, social, and governance
(ESG) aspects. The regulation was implemented on 10 March 2020, and its
aim is to move towards more coherently designed sustainability-related
information in the securities market.
The guaranteed pension provides basic social security for individuals with
little or no income. Residents of Sweden are eligible for a guaranteed
pension beginning at age 65. To receive a full guaranteed pension, an
individual must in principle have resided in Sweden for 40 years after age
25. Residence in another EU/EEA country can also be credited toward a
guaranteed pension. Refugees can include residence in their home country
and thus receive a full guaranteed pension.
Sustainability in the fund market
Guaranteed Pension12
27

In 2020 the maximum guaranteed pension for a single pensioner was
SEK 8,597 per month (2.181 price-related base amounts ) and for a
married pensioner SEK 7,690 per month (1.951 price-related base amounts).
The guaranteed pension is reduced for persons with an earnings-related
pension. The reduction is taken in two steps: for low incomes, the
guaranteed pension is decreased by the full amount of the earnings-related
pension; for higher incomes, the guaranteed pension is decreased by only
48 percent. This means that a single pensioner with a monthly earnings-
related pension of SEK 12,530 or more received no guaranteed pension in
2020. For a married pensioner the corresponding income limit was
SEK 11,153.
An example: A pensioner living alone has an earnings-related pension
equivalent to 2.26 price-related base amounts. The guaranteed pension is
first reduced by the full amount of income up to 1.26 price-related base
amounts. The remainder of 0.921 price-related base amount (=2.181–1.26)
is reduced by 48 percent of the income above 1.26 price-related base
amounts, which in this example gives a guaranteed pension of 0.441 price-
related base amount (=0.921–0.48  (2.26–1.26)). The total inkomstpension
and guaranteed pension will then be 2.701 price-related base amounts
(0.441+2.26).
When calculating the guaranteed pension, the premium pension and the the
effects of a possible early withdrawal of the inkomstpension are both
disregarded. Rather the “inkomstpension” is calculated, which reduces the
The figure shows total public pension at different levels of the income-based national pension, SEK per month.
Figure 4.2 Income-related Pension and Guaranteed Pension
13
⋅
28

guaranteed pension as if it had been earned at 18.5 percent instead of
16 percent and as if it had been levied at the earliest at age 65. These rules
facilitate administration of the
guaranteed pension and mean that there is no
financial gain from taking inkomstpension early.
The guaranteed pension is financed by the tax revenue of the central-
government budget and is therefore not included in the income statement
and balance sheet of the pension system.
Persons born before 1938 have not earned either an inkomstpension or a
premium pension. Instead, they receive the ATP (supplementary pension)
according to the old pension system. The level of the ATP pension is based
on an individual’s income for the 15 years of highest income, and 30 years
with income are required for a full pension.
For persons born in 1938–1953, there are special transitional provisions.
These individuals receive a portion of their earnings-related old-age pension
as an ATP and the rest as an inkomstpension and a premium pension. The
younger the individual, the smaller the proportion of ATP. Persons born in
1938 receive 80 percent of their ATP; those born in 1939 receive 75 percent
of their ATP, etc. There is an additional guarantee that the pension received
will not be less than the ATP earned by the individual through 1994 – the
year of the decision in principle to adopt the pension reform. Those born in
1954 or later earn their entire pensions under the provisions for the
inkomstpension and the premium pension.
ATP
29

Table 4.2 Proportion Granted a National Pension at Various Ages 
Percent
Birth
cohort
61
62
63
64
65
66
67
68
69
70
71-
Total
Avg age
1938
3.6
2.3
2.3
2.1
77.3
4.1
3.2
0.8
0.3
0.3
0.7
97.1
64.9
1939
3.9
1.9
2.1
2.3
75.6
6.5
2.3
0.8
0.3
0.3
0.8
96.9
65.0
1940
3.0
2.1
2.5
3.1
75.9
5.0
2.6
0.8
0.4
0.5
0.7
96.6
65.0
1941
2.9
2.2
3.0
3.7
73.2
6.3
2.8
0.8
0.5
0.4
0.7
96.5
65.0
1942
3.4
2.9
3.4
3.9
70.8
6.2
3.4
1.2
0.5
0.4
0.7
96.7
64.9
1943
3.9
3.1
3.6
5.3
66.4
7.1
4.4
1.2
0.4
0.5
0.8
96.6
64.9
1944
4.7
3.4
4.7
5.9
63.1
7.9
4.0
1.1
0.5
0.5
0.8
96.5
64.9
1945
5.1
4.2
5.3
6.1
61.5
7.2
4.0
1.3
0.5
0.5
0.8
96.4
64.8
1946
6.0
4.8
5.4
6.7
59.1
6.7
4.2
1.2
0.5
0.6
0.8
96.1
64.7
1947
6.3
4.6
6.0
7.4
56.7
6.9
4.7
1.3
0.6
0.5
1.0
95.9
64.7
1948
6.0
4.9
6.7
7.8
54.6
7.3
5.0
1.5
0.5
0.5
1.0
95.8
64.7
1949
5.8
5.4
6.9
8.6
52.2
7.9
5.4
1.4
0.6
0.5
1.1
95.8
64.7
1950
5.8
5.4
7.7
9.1
49.9
8.6
5.4
1.6
0.7
0.6
1.1
95.9
64.7
1951
6.5
6.3
8.0
9.3
47.5
8.3
5.5
1.8
0.7
0.6
1.2
95.8
64.7
1952
6.8
6.8
8.4
10.3
44.3
8.9
6.0
2.0
0.8
0.6
1.2
96.1
64.7
1953
7.7
6.5
9.4
10.4
41.8
9.5
5.1
3.0
0.9
0.7
1.2
96.0
64.6
1954
7.5
7.1
9.5
10.7
40.3
9.7
1955
7.5
6.6
10.2
11.1
39.3
1956
7.0
7.8
10.3
10.8
1957
7.7
7.8
9.8
1958
8.9
7.5
a. The proportions are for new retirees in relation to the potential number of retirees as of December 2019.
Ages are as of December 31 of the year when the pensioner began drawing an inkomstpension/guaranteed
pension. Prognosis for the highest ages, prognosis in italics. For those born 1959, the minimum withdrawal
age is 62 and they are therefore not included.
a
Table 4.3 Number of newly granted and deceased pensioners, in thousands and as a proportion of all old-
age pensioners, 2020
Number of
women
Proportion,
percent
Number of
men
Proportion,
percent
Number in
total
Proportion,
percent
Newly granted
54
4.3
54
4.8
108
4.6
Deceased
47
3.8
46
4.1
93
3.9
Old-age pensioners
1,244
1,119
2,363
a. Applies to those who have an inkomstpension, supplementary pension, or guaranteed pension.
a
30

Individuals new granted pension in 2020 accounted for 4.6 percent of all
old-age pensioners and those who died accounted for 3.9 percent of the
total.
Pensions paid to new beneficiaries were 4.5 percent of all payments and
were slightly higher than the pensions of the deceased would be were they
still alive, which was 3.7 percent.
This section describes the pension system in figures.
Figure 4.3 shows average income for 2019, average pension credits to
savers’ accounts in 2020 and average pension disbursement in 2019.
The average income increases during the first half of the earnings period,
then levels off at age 45 before turning downwards and falling sharply after
age 60. One reason for the decrease in average income is the increase in the
proportion of persons with sickness compensation (disability pensioners)
with lower average incomes. Another reason for the decrease in average
income is that certain individuals have reduced their work hours, or have
fully retired during the year. The importance of the upper limit, the ceiling,
on the earning of pension credit is shown in the figure – the average
pension-qualifying income (pensionsgrundande inkomst, PGI) would follow
the line for Incomes, no ceiling if there had not been a ceiling.
Persons with an income lower than 0.423 price base amount (SEK 19,670)
for 2019) are included in the uncapped income (no ceiling income) group,
but do not receive a fixed pension-qualifying income. In some age groups,
where a relatively large proportion have an income below the limit, the
average pension-qualifying
income is greater than the average income. This
has to do
with low-income people pulling down the average income, but
does affect the average pension-qualifying income. These age groups are
found mainly among younger people, a majority of whom have only
sporadic income, and among women aged 66–67, a relatively high
proportion of whom have an income below the limit.
The figure provides an overview of the level of disbursements to the
2,269,000 people receiving a pension from the public pension system in
December 2019. ATP pension still accounted for the largest part of the
pension but it is noticeable that inkomstpension and premium pension begin
to replace ATP pension for cohorts born in 1938 and later. For younger
Table 4.4 National public pension paid out for newly granted and deceased old-age pensioners, monthly
amounts in SEK million and in relation to total national public pension paid out, 2020
Amount
women
Proportion,
percent Amount men
Proportion,
percent
Total
amount
Proportion,
percent
Newly granted
657
4.3
740
4.5
4.5
Deceased
487
3.4
665
4.1
3.7
Old-age pensioners
14,438
16,306
a. The monthly amount is for the last month the individual had a pension.
a
The National Pension System – in Illustrations and Figures
Incomes, Pension Credit and Pension Disbursed
31

cohorts, their pension consists wholly or almost wholly of inkomstpension,
premium pension and guarantee pension. Guarantee pension still makes up a
large part of the pension, especially among older cohorts. For the older age
groups, the guaranteed pension is a large part of the pension, especially for
women. For the younger cohorts, the guaranteed pension represents an
increasingly small part of their pension.
The width of the bars reflects the number of people in the annual cohort,
with cohort 1990 as the norm.
Refers to 18–89 years.
Figure 4.3 show that women on average have lower incomes than men. We
also see that the ceiling on pension-qualifying income has a greater negative
Figure 4.3 Average income, pension credit earned and pension disbursed 2019
32

influence for men than for women, since a larger share of men’s incomes are
above the ceiling. The fact that women have a greater share of pension-
qualifying amounts than men is illustrated by the fact that women have
more dark blue in their pension base than men - more details on pension-
qualifying amounts can be found in Figure 4.6. Moreover, women on
average have lower pensions and considerably more guaranteed pension
than men.
Figure 4.4 below shows uncapped pension-qualifying income divided
between women and men. Incomes up to 8.07 income-related base amounts
(SEK 519,700 for income year 2019) form the base for the national pension.
The diagram below shows incomes for the income year 2019 divided up in
rising order (in total 5,779,000 persons, of which 2,809,000 women and
2,970,000 men. Of these, 4,859,000 people had incomes below the
contribution ceiling (2,507,000 women and 2,352,000 men).
Roughly 618,000 men, or 21 percent of men, had an income above the
ceiling on pension-qualifying income. The corresponding proportion for
women was 11 percent or approximately 302,000 persons. The table below
shows the average uncapped pension-qualifying income and pension-
qualifying income for women and men.
Refers to tax-assessed earned income (wages and salaries, income from active and passive business operations,
sickness cash benefits, parental allowances, sickness and activity compensation, unemployment compensation
etc.). The income is before deduction of the individual pension contribution and is shown for persons with incomes
above the minimum for the obligation to file a tax declaration, 42.3 percent of the price-related base amount. The
horizontal line at SEK 519,700 designates the ceiling on contributions.
Figure 4.4 Uncapped pension-qualifying income for women and men, income year 2019
Uncapped pension-qualifying income
33

Table 4.5 reveals that women’s incomes are lower than men’s – 80 percent
of uncapped pension-qualifying income and 87 percent of pension-
qualifying income.
The average pension credit for inkomstpension and premium pension in
2019 amounted to SEK 56,000 – lower for women (SEK 53,000) and higher
for men (SEK 58,900). See table 4.6 below.
From the table above and figure 4.5 it can be seen that the average pension
credit for women was approximately 90 percent of men’s.
Table 4.5 Average Uncapped Pension-Qualifying Income and Pension-Qualifying Income, Income Year
2019
SEK
Uncapped pension-qualifying income
Pension-qualifying income
Women
295,300
276,700
Men
368,100
319,300
Total
332,700
298,600
Table 4.6 Average Pension Credit Earned, 2019
SEK
Inkomstpension
Premium pension
Total
Women
46,000
7,000
53,000
Men
51,000
7,900
58,900
Total
48,600
7,400
56,000
Pension Credit for the Inkomstpension and the Premium Pension
34

The average pension credit to inkomstpension and premium pensions
decreases sharply between ages 64 and 65 and then levels off between 65
and 66 (age at the end of the year). This has to do with many people
choosing to take their pension and stop working at 65, resulting in lower
annual income and less pension credit earned during that year.
Credit is granted for pension-qualifying amounts in particular phases of
individuals’ lives, such as years with small children or of studies. Between
1995 and 2010, national service gave pension credit. After being dormant
since 2010, conscription was resumed in 2018, and since then conscription
once more provides pension credit. Those who earned pension credit from
national service in 2019 were primarily men.
In 2019 pension-qualifying amounts constituted 6 percent of the allocated
pension base for women and approximately 2 percent for men. The largest
portion for women, 4 percent, consisted of amounts for years with small
children. For men childcare years also made up the largest portion, nearly
1 percent of the total pension base.
Viewed over a life cycle, pension-qualifying amounts are received by
younger people for study, national service and years with children, and later
in life amounts are received for sickness compensation.
The horizontal line at SEK 56,000 shows the average for all individuals.
Figure 4.5 Average Pension Credit Earned, Women and Men, earned 2019
Pension-Qualifying Amounts
35

The pension liability – the pension capital of the insured – in the
inkomstpension and the premium pension system was SEK 11,440 billion
billion as of December 31, 2020. The liability, broken down by sex, for ages
15 and up, is shown in Figure 4.7.
Figure 4.6 Pension-Qualifying Amounts, Income Year 2019
Pension Liability
36

Women have lower earned pension capital compared with men. It is also
clear that supplementary pension (ATP) is the principal pension asset for
older pensioners but will soon have completely disappeared for working-age
cohorts.
For savers, inkomstpension dominates, while the increasing importance of
premium pension can be seen. Provisions for premium pension were
introduced in 1995, before which all pension credits were set aside for
inkomstpension. Assuming that earnings began at age 20, everyone aged 45
or younger in 2020 has been earning income and premium pension
throughout their working life.
Figure 4.7 Pension liability, women and men, at year-end 2020
37

Average pension liability (the sum of all years of earned pension credit for
inkomstpension and premium pension) amounted to just over
SEK 1.3 million at the end of 2020. See table 4.7.
The figure above shows that average liability increases with increasing age
up to and including the age of 65. After that, liability decreases, since many
after that have entered retirement.
In Figure 4.9 below the disbursements of the national pension are shown in
rising order of size. Disbursements refer to December 2020 for women and
men
born in 1955 or earlier (1,157,000 women and 1,028,000 men). For
total pensions disbursed during 2020, see Note 2 in the chapter Notes and
Comments.
Table 4.7 Average Pension Liability, 2020
SEK
Inkomstpension
Premium pension
Total
Women
1,066,000
191,000
1,239,000
Men
1,204,000
223,000
1,408,000
Total
1,137,000
207,000
1,325,000
Figure 4.8 Average Pension Liability, 2020
Pension Disbursements
38

The difference in level and composition of different parts of pensions for
men and women is the most striking feature of the figure. The average
pension for women – income-based pension and guaranteed pension – was
SEK 11,700. The corresponding amount for men was SEK 14,700. Of
women’s national pensions, 93 percent consisted of income-based pensions
and 7 percent of guaranteed pensions. However, a full 47 percent of women
had some portion of guaranteed pension. That the proportion with
guaranteed pension increases sharply with age is not shown by the diagram.
Of the national pension for men, 98 percent consisted of income-based
pension and 2 percent of a guaranteed pension. A total of 16 percent of men
had some proportion of guaranteed pension. Neither the widow’s pension
nor the housing supplement, each of which is paid primarily to women, is
included in the figure.
The completely green bars indicate persons who have only guaranteed
pension and no income-based pension. This group consists predominantly of
women. Persons without an income-based pension with at least 40 years of
residence in Sweden receive the maximum guaranteed pension. This
explains the concentration of green at the maximum guaranteed pension for
“married persons” (SEK 7,690 per month in 2020) and for “unmarried
persons” (SEK 8,597 per month).
Those with a lower guaranteed pension, but also without any income-based
pension, have fewer years of residence in Sweden. Only persons born in
1938 or later can receive premium pension – based on their own income, but
only on that part earned since 1995. Thus the impact of premium pension is
still limited. However, the importance of premium pension is growing with
each new annual cohort that draws a pension. The few individuals with a
national pension exceeding SEK 20,000 per month have reached that
pension amount in part by postponing pension withdrawal. The maximum
public pension paid in 2020 was SEK 54,300 per month. It is a person born
Figure 4.9 Pension Disbursements, Women and Men, December 2020
39

later than 1938 who has continued to work after the age of 65 and who has
postponed withdrawing a pension.
The balance ratio is a crucial measure of the financial position of the
inkomstpension. It is used as part of the system’s indexation mechanism to
ensure its financial stability. This section explains how the balance ratio is
affected by some key factors.
The balance ratio is calculated as the ratio between the assets and liabilities
of the inkomstpension system. The assets consist of the assets of the AP
funds (the buffer funds) and the contribution asset.
The contribution asset
consists of the year’s contribution revenue multiplied by turnover duration,
where turnover duration measures how long it is expected to take, on
average, from the payment of SEK 1 in contribution to the system (income
age) until the pension credit created by the contribution is paid out in the
form of pension (payment age) .
The turnover duration – the difference between expected payment age and
earning age – decreases if average pension credits increase
less for younger
than for older people (increased earning age). For example, this may happen
if labour market entry is delayed. It also falls if
pension withdrawals are
brought forward (reduced payment age). Turnover duration tends to increase
with increased life expectancy, especially if the life expectancy of those with
above-average pension incomes increases (higher payment age).
The inkomstpension system has a liability to economically active persons
and to pensioners. The liability to economically active persons increases
with earned pension credits, while the liability to pensioners decreases with
pension disbursements. Liabilities are recalculated using the income index
(or balance index when balancing is activated). The liability also increases
with increased life expectancy, especially if life expectancy of people with
above-average pension amounts increases.
The fact that a general increase in life expectancy increases liability as well
as assets reduces the balance ratio sensitivity to changes in life expectancy,
even if the increase in assets is less than the increase in liability.
To this must be added the buffer funds. If the return on buffer fund capital is
higher than growth in average income, the funds contribute to strengthening
the balance ratio. Buffer funds account for approximately 16 percent of the
assets of the inkomstpension system, but as the funds’ returns are much
more volatile than other factors, the funds have a greater impact on the
development of the balance ratio relative to their share of assets.
The contribution asset grows mainly with the change in the inflow of
contrbutions (the sum of the pension base) and the liability is growing
mainly by the change in the income index (average income). This means
that if the sum of pension-qualifying income grows faster than average, the
balance ratio increases (all else being equal). In principle, this is true if
employment increases, but as the contribution base to the pension system
includes the unemployment benefit, the sickness benefit, and the sickness
14
What affects the development of the balance ratio?
The number of persons with pension-qualifying income affects the
relationship between contribution asset and pension liability
40

compensation, the link to employment trends is not absolute. However, the
link to the evolution of the number of persons with pension-qualifying
income is central. If the number of people with pension-qualifying income
increases, the balance ratio is affected in a positive direction.
Above is described, in a somewhat stylised fashion, how changes in the
balance ratio can be broken down into changes in the ratio between
contribution revenue and average income, changes in turnover duration and
changes in pensioner life expectancy, as well as the return on buffer fund
capital. In particular, the relationship between contribution revenue and
average income is affected by the utilisation of resources in the labour
market, which varies with the business cycle.
The state of the economy is often described in terms of how actual GDP
values, employment, and other indicators relate to corresponding potential
values.  The difference between the growth of actual and potential
variables can therefore be used as an approximate measure of cyclical
adjustment of the ratio of contribution revenue to average income. As
described above, the relationship between contribution revenue and average
income is mainly influenced by the rate of change in the number of people
with pension-qualifying income. Below, the rate of change in the size of the
labour force is used as an approximation of the rate of change in the number
of persons with pension-qualifying income. Based on this, a cyclical effect
on the ratio of contribution revenue to average income is estimated.
The economic downturn triggered by the Covid-19 pandemic meant that the
number of employed persons decreased and the number of persons outside
the labour force increased. The employment rate fell for the first time since
the financial crisis.  The actual labour force for 2020 was lower than the
potential one, while that of 2019 was slightly higher , which according to
the above reasoning would constitute a negative contribution to the balance
ratio.
Turnover duration can also be affected by the business cycle. Delayed
labour market entry, which often occurs especially in deeper recessions,
tends to increase the earning age and thereby reduce turnover duration. In
contrast, fund returns over the past 30 years have not tended to be correlated
with indicators of the economic situation.
To illustrate some possible scenarios, a number of stress tests are carried out
on a simplified balance sheet and balance ratio. The examples are to be
regarded as purely illustrative.
Option 1: No change in contribution revenues, but the number of persons
with pension-qualifying income adjusted for the difference between the
actual and the potential workforce. As a consequence, the income index
is adjusted downwards by 0.2 percent for 2020 and adjusted upwards by
0.4 percent for 2021.
Option 2: Buffer fund returns are reduced by SEK 162 billion in 2020
(corresponding to the funds’ results at mid-year 2020).
15
16
17
18
•
•
19
The balance ratio is affected by the business cycle
Effects of various alternatives on the balance sheet and balance ratio
41

Option 3: Lowest withdrawal age 63 in 2020
In the first option, the income index for 2021 is assumed to be higher than it
actually was (due to fewer people with PGI) and slightly lower for 2020
(due to more people with PGI), which increases pension liability slightly
and the balance ratio thus weakens marginally. The second option, which
corresponds to the position of the buffer funds after the first half of 2020,
and in which fund returns are reduced by approx. SEK 162 billion, has a
significantly greater impact on the balance ratio.
•
19
Table 4.8 Simplified Income Statement and Balance Sheet
2020
Change,
alternative 1
Change,
alternative 2
Change,
alternative 3
Change in fund assets
Pension contributions
295,499
0
0
0
Pension disbursements
-326,266
0
0
1,869
Return on funded capital
130,865
0
-170,465
0
Total Change in fund assets
100,098
0
-170,465
1,869
Change in contribution assets
Value of change in 
contribution income
182,990
0
0
179
Value of change in 
turnover duration
93,798
0
0
17,190
Total Change in contribution 
assets
276,788
0
0
17,369
Change in pension liability
New pension credit
-304,394
0
0
0
Pension disbursements
326,257
0
0
-1,869
Indexation
-339,735
-34,977
0
808
Other
-645
0
0
0
Value of change in life expectancy
-10,503
0
0
90
Total Change in pension liability
-329,020
-34,977
0
-971
Net income for the year
47,866
-34,977
-170,465
18,267
Assets
Fund assets
1,696,440
0
-170,465
1,869
Contribution assets
8,893,004
0
0
17,369
Total assets
10,589,444
0
-170,465
19,238
Liabilities and income
Closing balance
806,196
-34,977
-170,465
18,267
Pension liability
9,783,248
34,977
0
971
Total liabilities and income
10,589,444
0
-170,465
19,238
Balance ratio
1.0824
-0.0031
-0.0174
0.0019
a. Including administration costs (which are assumed to be the same in alternative with reduced returns).
a
42

It may also be noted that raising the minimum age for pension disbursement
strengthens the balance ratio even under the assumption that contribution
income does not increase, mainly because the payment age increases. If
raising the minimum age also leads to increased labour force participation,
the balance ratio is further strengthened.
43

Footnotes
1. Pension credit for the premium pension may be transferred between spouses.
Transferred capital is currently reduced by 6 percent, since more transfers are
made to women than to men and women on average live longer than men.
2. In 2020: 8.07 x the income-related base amount = SEK 539,076.
3. In 2020: 0.423 x 47,300 = SEK 20,008.
4. Self-employed persons pay a national pension contribution of 7 percent and
self-employment charge of 10.21 percent.
5. This tax was SEK 20.6 billion in 2020; see Chapter 8 Note 1.
6. 0.1721 / 0.93  0.185
7. In addition there is the Sixth National Pension Fund, which is an asset in the
inkomstpension system but provides no contributions and pays no pensions.
8. Capital-weighted return. For further information, see chapter 6 Changes in the
Value of the Pension System, section on measures of change in value in the
premium pension system.
9. The balance index for the year 2017 and later will be calculated using the
damped balance ratio (SFS:676). See also Appendix B.
10. Next year’s balance index is calculated by multiplying the balance index
(103.66) by the change in the income index, multiplied by the damped balance
ratio. See Appendix A.
11. The inkomstpension is recalculated as the ratio between the new and the old
income index divided by 1.016. In years for which a balance ratio has been set,
the income index is replaced by the balance index.
12. These provisions concern the guaranteed pension for persons born in 1938 or
later. For older individuals, other rules apply.
13. In 2020 the price-related base amount was SEK 47,300.
14. Details can be found in Appendix B, Mathematical description of the balance
ratio.
15. Since the income measure in the income index is based on the sum of pension-
qualifying income without limitation of the ceiling on pension-qualifying
earnings (uncapped PGI), differences in income growth above and below the
earnings ceiling can in principle affect the balance ratio. However, in recent
years, differences in the rate of change between contribution revenue and
uncapped PGI have been small.
16. The levels that are consistent with stable inflation in the long run. See the The
Swedish National Institute of Economic Research (2018) The Economic
Situation in October 2018, pp. 75-79, for a further description of economic
terminology.
17. SCB (2021) The labour market situation for the entire population age 15–74,
AKU 2020 (in Swedish).
≈
44

18. Swedish Pension Agency’s calculations based on data from the National
Institute of Economic Research’s forecast from December 2020.
19. In this case it is assumed that earning is constant, that changes in the payment
age will take full effect starting in 2020 and that no pensioners are born in
1958.
45

5. Costs of Administration and Capital
Management
The total cost of insurance administration and capital management for the
pension system, in addition to other charges, amounted to SEK 7.4 billion,
of which SEK 2.5 billion is reported in the income statement of the pension
system. The SEK 2.5 billion is the sum of insurance administration
(SEK 1,441 million) and the operating expenses of the National Pension
Funds (SEK 1,018 million). See table 5.1.
For inkomstpension the costs reported in the income statement amounted in
2020 to SEK 1,918 million, of which SEK 900 million was for insurance
administration and SEK 1,018 million was for National Pension Funds’
operating expenses. In addition to the SEK 1,018 million in operating
expenses, the National Pension Funds had fixed management fees of
SEK 617 million. The sum of reported asset management costs as shown in
the National Pension Funds’ income statements thus amounted to
SEK 1,635 million. Performance-based fees and transaction costs such as
brokerage commissions are not reported as direct costs by the National
Pension Funds but instead have a negative effect on returns. Performance-
based fees are not ordinary management fees, but a way for the National
Pension Funds to share risk and reward with their external managers. In
total the National Pension Funds paid SEK 625 million in performance-
based fees and SEK 269 million in brokerage commissions and other
transaction costs. When these costs and fees are included, the sum total of
costs for inkomstpension is SEK 3,429 million.
In the income statement of the Swedish Pensions Agency for the premium
pension system are reported administrative costs of SEK 541 million. In
previous years, in addition to administration costs, payments have also been
made towards the cost of setting up the defined contribution pension system,
a set-up loan which was repaid in 2018. The total cost of premium pension
insurance administration amounted to SEK 578 million. See Total Insurance
Administration in table 5.1.
The amount of costs is an important factor for future pensions. Of the factors affecting
pension capital, the size of costs is the one which the responsible authorities have the
greatest opportunity to influence.
In the case of premium pension, however, costs
also depend on the saver’s own choice of fund.
This section brings together gross  and net reported costs  and also transaction costs
which are impossible for the National Pension Funds and the Swedish Pensions
Agency to wholly quantify. The aim is to provide as complete a picture as possible of
the total costs of the old-age pension system. It is important to keep in mind that net
management costs and transaction costs have already had a negative effect on the
performance of the funds.
1
2
Accounting for Total Costs
Inkomstpension costs
Premium pension costs
46

Within the premium pension system the item Management Fees refers to
both fixed and performance-based fees that the premium pension funds,
including the 7th National Pension Fund, charge after rebates have been
returned to premium pension savers. The gross calculated premium pension
funds’ management fee amounts to SEK 7,362 million. Of this gross fee it is
estimated that repayment from the funds provides SEK 4,854 million in the
form of rebate. The net fee can then be totaled as SEK 2,508 million . The
rebate system limits the maximum fee charged. For equity funds the fee is
limited to maximum 0.89 percent after returned rebate, for bond funds it is
limited to 0.42 percent, and for mixed and generation funds it is limited to
0.62 percent. In addition to the SEK 2,508 million in fixed management fees
an estimate of premium pension funds’ transaction costs is also shown.
Transaction costs consist primarily of commissions paid by the funds when
trading in securities. As of 2020, this figure is based on actual figures
provided by fund companies and estimated to be SEK 955 million in 2020.
In total, some 320 funds reported their transaction costs, representing about
92 percent of total capital.
3
Table 5.1 Costs and Charges of the Old-Age Pension System
millions of SEK
Inkomstpension
Premium pension
Total
Insurance administration
Pension administration
459
472
931
Payments to other agencies
441
69
510
Amortization and interest 
implementation loan
0
Total Insurance administration
900
541
1,441
Capital management costs and charges
Operating expenses of the National 
Pension Funds (reported gross)
1,018
1,018
Management fees
Fixed management fees (reported net)
617
617
Performance-based fees
625
625
Total Management fees
1,242
2,508
3,750
Transaction costs
269
955
1,224
Total Capital management 
costs and charges
2,529
3,463
5,992
Total
3,429
4,004
7,433
a. The amount for the inkomstpension refers to actual cost, whereas the amount in Note 4 in chapter 8 refers
to the compensation paid by the National Pension Funds for costs of administration.
b. This item represents fees that the National Pension Funds pay only if a particular manager achieves a
certain agreed result.
c. Transaction costs refer to brokerage and clearing fees charged on the stock and derivatives market. These
charges are included in the transaction and have a negative effect on the return earned by the funds.
Interest and foreign-currency transactions are paid for through the spread between buying and selling
prices and thus cannot be reported as a separate charge. The calculation of premium pension transaction
costs is now based on the reported costs of approximately 320 funds.
a
b
c
47

Below, in table 5.2 and table 5.3, cost items are shown for the past five years
and are reported in millions of SEK. Figures refer to SEK per number of
insured (i.e., more than 8.6 million people with a pension account, including
pensioners) and extends from 2001.
Table 5.2 Costs of the Inkomstpension
millions of SEK
2016
2017
2018
2019
2020
Insurance administration
Pension administration
455
434
428
411
459
Payments to other agencies
406
432
421
406
441
Total Insurance administration
861
866
849
817
900
Capital management costs and charges
Operating expenses of the National 
Pension Funds (reported gross)
890
953
956
1,016
1,018
Management fees
Fixed management fees (reported net)
847
801
760
753
617
Performance-based fees
372
442
331
406
625
Total Management fees
1,219
1,243
1,091
1,159
1,242
Transaction costs
289
233
244
203
269
Total Capital management 
costs and charges
2,398
2,429
2,291
2,378
2,529
Total
3,259
3,295
3,140
3,195
3,429
a. The amount for the inkomstpension refers to actual cost, whereas the amount in note 4 in chapter 8 refers
to the compensation paid by the National Pension Funds for costs of administration.
b. Some adjustments have been made to fees in 2018.
c. See the explanation in table 5.1 Total Costs and Charges of the Old-Age Pension System.
a
b
c
Costs over Time
48

Table 5.3 Costs of the Premium Pension
millions of SEK
2016
2017
2018
2019
2020
Insurance administration
Pension administration
379
417
463
515
472
Payments to other agencies
63
68
66
63
69
Amortization and interest 
implementation loan
169
181
325
0
0
Total Insurance administration
611
666
854
578
541
Capital management costs and charges
Management fees (net reported)
2,033
2,466
2,279
2,500
2,508
Transaction costs
428
519
551
646
955
Total Capital management 
costs and charges
2,461
2,985
2,830
3,146
3,463
Total
3,072
3,651
3,684
3,724
4,004
Figure 5.1 Insurance Administration, Inkomstpension
49

Figure 5.2 Insurance Administration, Premium Pension
Figure 5.3 Capital management costs and charges, Inkomstpension
50

Table 5.2 shows that inkomstpension costs have been somewhat stable in the
last five years. After declining during several years, insurance
administration costs increased in 2020. Table 5.5 shows a certain reduction
in asset management costs relative to assets managed.
Total premium pension capital management costs and fees have increased
from 2019 to 2020, also in terms of cost per insured. The development of
capital management costs and fees results from the fact that average
managed capital has increased and that capital management costs are
charged as a percentage of capital managed. A large part of the increase can
also be explained by the new method of accounting for transaction costs. On
the other hand, as a percentage of the capital, premium pension costs have
decreased over the last five years. The rebate system used in the premium
pension system is progressive, meaning that greater managed capital
requires a higher percentage discount and thus lower fees. The annual cost is
estimated on the basis of costs during quarters 1–3.
There are a number of cost items within insurance administration that are
common to inkomstpension and premium pension. Examples are the
production and distribution of the Orange Envelope, and reimbursement to
the Swedish Tax Agency for tax collection, etc. Such costs are spread
between the various branches of insurance in proportion to the number of
insurees, volume of fees or other factors.
In 2020 the total capital management costs for the First–Fourth National
Pension Funds and for the much smaller Sixth National Pension Fund was
0.10 percent of the capital managed. The AP Funds’ performance-based fees
amounted to almost 0.04 percent, and transaction costs amounted to slightly
Figure 5.4 Capital management costs and charges, Premium Pension
Capital Management Costs in Relation to Pension Capital
Managed
51

less than 0.02 percent of capital managed. The sum of asset management
costs and fees totalled 0.15 percent of assets under management.
The capital management costs reported for funds within the premium
pension system amounted after rebates to 0.17 percent, while the funds’
transaction costs are estimated at 0.06 percent. The total of capital
management costs and charges was thus 0.23 percent of the capital
managed.
The percentual cost differences between the inkomstpension’s funded assets
and premium pension funds are explained partly by economies of scale
within AP funds 1–4, partly because these funds invest approximately
35 percent of their capital in bonds or similar assets with low management
costs compared to shares. In the premium pension system, approximately
10 percent of total assets are invested in holdings of this type.
Table 5.4 Average capital managed
billions of SEK
2013
2014
2015
2016
Inkomstpension
1,008
1,121
1,207
1,276
Premium pension
527
662
829
854
2017
2018
2019
2020
Inkomstpension
1,367
1,398
1,490
1,646
Premium pension
1,030
1,161
1,280
1,518
Table 5.5 Capital Management Costs in Relation to Capital Managed
percent
2015
2016
2017
2018
2019
2020
Inkomstpension
Reported capital management costs
Operating expenses of the National 
Pension Funds (reported gross)
0.08
0.07
0.07
0.07
0.07
0.06
Fixed management fees (reported net)
0.08
0.07
0.06
0.05
0.05
0.04
Total Reported capital management 
costs
0.15
0.14
0.13
0.12
0.12
0.10
Performance-based fees
0.03
0.03
0.03
0.02
0.03
0.04
Transaction costs
0.03
0.02
0.02
0.02
0.01
0.02
Total Inkomstpension
0.21
0.19
0.18
0.16
0.16
0.15
Premium pension
Reported capital management costs
Fixed management fees (reported net)
0.25
0.23
0.22
0.20
0.18
0.17
Total Reported capital management 
costs
0.25
0.23
0.22
0.20
0.18
0.17
Transaction costs
0.05
0.05
0.05
0.05
0.05
0.06
Total Premium pension
0.30
0.28
0.27
0.25
0.23
0.23
52

To cover the AP funds’ reported expenses for inkomstpension, a cost
deduction is made from the pension balances each year. For the year 2020,
cost deduction for inkomstpension from pension balances was
0.0305 percent. The deduction for costs is only made during the
accumulation phase and not when the pension is disbursed. Neither the fixed
net reported management fees of 0.04 percent of assets managed nor the
performance-based fees nor the trading costs of 0.02 percent of assets
managed are charged to pension savers through cost deductions.
The net reported costs are charged to the buffer capital in the AP funds, but
unlike the gross reported costs are not financed through a deduction from
pension savers’ inkomstpension accounts.
In 2020 the deduction for administrative costs for premium pension
insurance was on average 0.04 percent of the premium pension capital. The
maximum cost charged in 2020 was SEK 100 per account holder. The
premium pension has, just like inkomstpension, small periodic discrepancies
between fee charged and the actual cost. These deviations too are corrected
continuously.
Table 5.6 Insurance administration costs
percent
2014
2015
2016
2017
2018
2019
2020
Inkomstpension
0.0326
0.0284
0.0302
0.0305
0.0310
0.0288
0.0305
Premium pension
0.09
0.07
0.07
0.06
0.07
0.04
0.04
a. The cost deduction for inkomstpension also includes costs incurred by the National Pension Funds . The
deduction is made up until the point where the first payment is made.
a
Insurance Administration Costs in Relation to Pension
Balance/Capital
53

Costs are an important factor in determining the size of a future pension. A
seemingly low annual fee can reduce the pension by a considerable amount
since the fee is deducted annually over a long period. Of the factors
affecting pension capital, the size of costs is the one which the responsible
authorities have the greatest opportunity to influence. Also the insured are
able to influence certain costs for the premium pension.
The following simplified calculation provides a fairly accurate portrayal of
how a certain cost percentage affects the size of the pension disbursed. The
average time for which a paid-in contribution remains in the inkomstpension
system before being disbursed is roughly 21 years.
If the cost of the inkomstpension is 0.03 percent, the charge for
administrative costs will reduce the inkomstpension to (1–0.0003)  which
is about 99 percent of what it would have been without the charge, or by
roughly 1 percent. If premium pension costs are 0.23 percent, the deduction
will reduce the premium pension by just over 7 percent (1–0.0023)  of
what it would have been without the cost deduction. The reason for the
deduction being made over 33 years is that in the premium pension system,
pension capital is annually recalculated with costs deduction even during the
period of retirement. The expected return is slightly higher, which
contributes to a longer turnover period. A fairly normal management fee in
Sweden for saving outside the national pension system is around 1 percent –
not infrequently, it is even higher. If the charge for costs for the same period
as in the example above is 1 percent, pension capital savings will be
72 percent of what they would have been with a fee of 0 percent; in other
words, 28 percent is lost in charges for costs.
Tot.costs
Costs of administration including capital management costs
Adm.costsCosts of administration
Capital
Premium pension capital
Figure 5.5 Premium pension costs and capital
21
33
What Difference Do Costs Make in the Size of a Pension?
54

Footnotes
1. The pension system’s income statements for inkomstpension and premium
pension show the costs that the Swedish Pensions Agency and the National
Pension Funds report as expenses in their own income statements as “gross
reported costs.”
2. The asset management costs of the National Pension Funds and the premium
pension system which are ‘net reported’ against revenue and net fund return
are not visible in the income statement of the pension system. The concept of
net reported costs refers here to such costs as those which in the National
Pension Funds’ income statement consist of fixed management fees and which
in the premium pension income statement are used as the net for items named
management fees and discounts on management fees.
3. These costs are preliminary and are based on an upward adjustment of costs
for the quarters 1–3. The amount does not include management fees relating to
traditional insurance of SEK 11.5 million. This cost is net reported through a
reduction in return on funded capital (see note 17 in Chapter 8)
55

6.
Changes in the Value of the Pension System
The pension balance in the inkomstpension system is normally written up in
step with the income index, but during a balancing period, the balance index
is used. Between 2010 and 2018, there was a period of rebalancing.
The change in value only occurs at the turn of the year for the
income/balance index, unlike the premium pension system, where changes
are ongoing. Indexation between 2020 and 2021 was 2.2 percent (see the
year 2020 in table 6.1 below). It was thus by this percentage that earned
inkomstpension credit of employed persons was changed at the end of the
year.
For pensioners the inkomstpension and the ATP are recalculated each year
by the change in the income-/balance index, reduced by 1.6 percent. The
reduction is due to the fact that an advance interest rate of 1.6 percent has
already been credited to the inkomstpension in the annuity divisor. .
During a balancing period, inkomstpension is affected by the development
of
capital markets because the value of the AP funds is included in the
calculation of
the balance ratio. AP funds value represents almost 16 percent
of reported assets and the impact is therefore not extensive. The decrease in
the market value of investments in the record drop of 2008 was one of the
main reasons why balancing was activated in 2010. The positive return has
subsequently contributed to higher indexation of inkomstpension and to the
ending of balancing in 2018.
Sweden’s national pension is based primarily on earnings. In each of their
economically active years, gainfully employed individuals contribute a certain portion
of their income toward a pension. The bulk of their contribution goes to the
inkomstpension system, a lesser share to the premium pension system. Pension
credit is accumulated over a long period, 40–45 years, sometimes even more. The
size of future pensions will thus depend on the change in the value of contributions
paid into the system. For example, someone who deposits a constant amount each
year for 40 years, at an annual interest rate of 2 percent, will end up with a final
balance that is 54 percent higher than that of a saver with no return.
In the inkomstpension system the change in value is normally determined by the
percentage increase in the income index. This index follows the average growth rate
in the earnings of the economically active. In the premium pension system, on the
other hand, the change in value is determined by the return on the funds of pension
savers. For pensioners who have opted for traditional insurance, the increase in value
is determined by the rate of return decided by the Pensions Agency, based on the
increase in value of the assets invested in by the Pensions Agency.
The discussion below applies hereafter to the development within fund insurance. A
significant difference between the inkomstpension and premium pension system is
that the change in the value of the inkomstpension is the same for everyone, whereas
the return of the premium pension may vary from one individual to another,
depending on the type of funds chosen.
1
Changes In Value During 2020
56

Change in value of the premium pension system is wholly determined by
developments in capital markets. After a positive development on the global
(calculated in SEK) as well as Swedish stock markets in 2019, the rise
continued during the beginning of 2020. This was followed by a dramatic
decline in the spring as a result of the coronavirus pandemic. However,
capital markets recovered and the 2020 change in value of premium pension
funds was finally 6.4 percent.
The change of value in the premium pension system can be measured in
several ways. The measures presented in this chapter are so-called time-
weighted return and capital-weighted return. Another term for capital-
weighted return is internal rate of return.
Time-weighted return is used to describe the change in value of a fund or an
index. The time-weighted return shows the return on one krona deposited at
the outset of the period. No consideration is given to whether deposits or
withdrawals have been made during the period.
Capital-weighted return can be used for evaluating the premium pension on
an overall basis, but also individual accounts. Consideration is given to the
Table 6.1 Annual Indexation of Inkomstpension Accounts and Return on Premium
Pensions
percent
Income-/balance index
Premium pension index
2004
2.4
8.8
2005
2.7
30.6
2006
3.2
12.1
2007
4.5
5.7
2008
6.2
-34.2
2009
-1.4
34.7
2010
-2.7
12.2
2011
5.2
-10.7
2012
5.8
12.1
2013
-1.1
21.1
2014
2.5
20.7
2015
5.9
6.4
2016
4.4
10.9
2017
2.6
12.6
2018
3.1
-3.4
2019
3.8
29.5
2020
2.2
6.4
a. The premium pension index measures how much an amount paid into the system at
a certain point in time has changed over a certain period (so-called time-weighted
return). In this case the period is the same as a calendar year. The return for
individual pension savers will normally have varied depending on the funds that
they have chosen.
a
Measures of Change in Value in the Premium Pension System
57

timing and amount of all deposits and withdrawals for the account, and to
the balance at the end of the period. The capital-weighted return matches the
average annual interest rate during the period.
In the section Income and Premium Pensions as Complementary, time-
weighted return is used, whereas capital-weighted return is used in the
section Change in Value of Pension Savers’ Accounts. (For a more thorough
description of the time- and capital-weighted return, see Appendix A.)
One reason for establishing the premium pension as complement to the
inkomstpension was that variations over the years in the growth of earnings
and return on capital could tend to offset each other. Development over time
shows that these indexations do not necessarily follow each other (see table
6.1 above). The importance of spreading risk may increase in the future,
when the premium pension funds’ share of total pension capital increases.
In December, 2000, premium pension savers could begin investing their 
capital in the funds of the system. Before then, the capital had been under 
temporary management, which had invested it in an interest-bearing account 
with the Swedish National Debt Office (Riksgälden). The value of an 
amount deposited at the start in 2000 has varied substantially over the years. 
Indexation of the inkomstpension have however remained relatively stable.
Those who refrained from selecting funds, and thus had their moneys
invested in the AP7 Såfa, the Central Government Fund Management
Alternative (Statens Årskullsförvaltningsalternativ), had by December 31,
2020 obtained a return on moneys invested in December, 2000, greater by
Value of SEK 100 paid into the inkomstpension system in December 2000 (income-/balance index) and into the
premium pension system (premium pension index and AP7 Såfa). Inflation is included as a reference.
Figure 6.1 Value of SEK 100
Income and Premium Pensions as Complementary
58

104 percentage points than that of the average fund saver (premium pension
index, which includes AP7 Såfa).
The time-weighted return shown above does not take into account changes
in the amount of capital during the period of saving, most notably deposits,
but disbursements as well. For individual savers, but also for the premium
pension system as a whole, it is important to show the return as measured by
the capital-weighted rate of return. One reason why this is the case is that
the aggregate deposits on pension savers’ accounts have grown significantly
over time, as the system is under construction. For example, the funds
included almost twice as much capital in December 2019 as in December
2014. In the subsequent years, i.e., 2020 and 2015 respectively, the time-
weighted returns were the same (see table 6.1), but the amount that could
benefit from this positive return was thus much larger in 2020. The capital-
weighted rate of return takes this difference into account by assigning
greater weight to 2020 than to 2015.
Figure 6.2 shows the progression by year of the average annual capital-
weighted rate of return for the premium pension built up at different points
in time, as well as the corresponding rate of return if the premium pension
had instead developed like the income/balance index. With this return, the
capital-weighted rate of return through the end of 2020 would have been
3.0 percent per year. This may be compared with the actual average capital-
weighted rate of return for the premium pension, 7.6 percent through 2020.
The diagram shows that the corresponding calculation through 2008 was
minus 0.8 percent for the premium pension system and plus 3.5 percent if
the premium pension system had developed like the income/balance index.
Each point on the curve shows the average annual internal rate of return (after 1995) until the time concerned.
Figure 6.2 Average Capital-Weighted Rate of Return for All Premium Pension Savers up to Different
Points in Time during the Years 2000–2020
Changes in Value of Pension Savers’ Accounts
59

Note that the curve does not show the actual capital-weighted rate of return
for inkomstpension savers, since the capital structure of the inkomstpension
system is considerably different.
Figures 6.1 and 6.2 reflect two points of view for the saver, based on time-
weighted and capital-weighted return as explained above. In the first
diagram SEK 100 is deposited in the premium pension system in December,
2000, and it is worth about SEK 297 at the end of December, 2020. The
value reached its low point of SEK 55 during 2002–2003. To take into
account the deposits of premium pension savers into the system each year,
and the long-term nature of pension saving, the second diagram shows the
average annual capital-weighted return up until a certain point in time. The
average annual capital-weighted return on moneys paid into the premium
pension system was 7.6 percent in December, 2020. The annual average
capital-weighted return was lowest, at -8.6 percent, in 2002 and highest, at
7.7 percent, in 2019. As the premium pension system matures, the annual
variation in capital-weighted return will diminish, as is clearly shown in the
diagram.
Figure 6.3 shows the average capital-weighted rate of return for pension
savers sorted according to their first year of contributing to the system. The
difference in return decreases the longer the birth cohorts have participated
and been paying into the system. Pension credit earned in 2019 was invested
in funds in December 2020; this also applies to new savers who had made
no active fund choice. Prior to the earning year 2017, capital for new savers
was invested in April of the following year.
Figure 6.4 shows the distribution of the capital-weighted rate of return
among pension savers who have been in the system for an equally long
time. Among pension savers who began earning pension credit in 1995 and
Figure 6.3 Average Capital-Weighted Rate of Return Annually from the Saver’s First Pension Qualifying
Year
60

who then invested it in funds in 2000, just over 99 percent reported a
positive change in value at the end of 2020. The figure is divided into those
who at some time made an active choice (the Fund Market) and those who
never made an active fund choice (AP7). The fact that return differs among
those who only had the national pre-selected alternative is mainly because
the distribution between the two funds involved, AP7 Equity Fund and AP7
Fixed Income Fund, varies according to the age of fund savers.
Since the data refer to participants since 1995, the explanation for the spread
is not that they entered the system at different times. Compare Figure 6.3,
which shows the distribution by first year of credit earning. Rather, the
principal reason is the choice of fund investments with differences in rate of
return.
Table 6.2 below summarizes the average annual change in value with the
time- and capital-weighted rates of return during the existence of the
premium pension system. From 1995 on, allocations were set aside for the
premium pension, but not until December, 2000, were the moneys paid into
funds. During the period 1995–2000 the moneys were invested in interest-
bearing assets.
The dashed lines indicate the median and the percentiles for 5 and 95 percent.
Figure 6.4 Pension Savers who Began Earning Pension Credit in the Premium Pension System 1995,
Sorted According to Annual Capital-Weighted Rate of Return up to and including 2020.
61

The aspects of the pension system that relate to its change in value cannot
be judged on the basis of the changes in value over only a few years. The
importance of a long-term view is easily underestimated, both when stock
prices are rising and when they are falling. For the 90-year period 1924–
2014, the average real rate of return globally was 6.1 percent per year.
However, this does not guarantee such a return in 10 or even in 20 to 30
years. For different 10-year periods since 1930, the real rate of return has
varied considerably, on the Stockholm Stock Exchange, from 23 percent per
year (1980–89) down to negative figures in certain other periods. There
have often been major changes between adjacent 10-year averages, both on
the Stockholm Stock Exchange and world-wide.
One conclusion is that “long term” is not 5–7 years, or even 10 years, as is
sometimes said, but that in the matter of equity returns one should imagine a
much longer period. In the context of pensions, it is reasonable for younger
people to have a 30–40-year perspective. Historically, the real value
development for longer periods has also been much more stable. Only over
a term of at least 35 years is the real value growth for global equities
comparable in stability with Swedish real wage development over 10 years.
Real wage growth is the factor above all that governs the value growth of
inkomstpension. The real wage per employee increased over the period
1918–2012 by an estimated 2.1 percent per year, thus significantly slower
than the annual 6.1 percent of real stock returns. The difference was most
pronounced during the 1980s and 1990s.
Table 6.2 Nominal Average Annual Change in Value and Inflation, Respectively
percent
1995–2020
2000–2020
Premium pension index (time-weighted)
5.4
5.6
Premium pension (capital-weighted)
7.6
7.8
Income/balance index (time-weighted)
2.8
3.0
Income/balance index (capital-weighted)
3.0
3.1
Inflation
1.1
1.3
Importance of a Long-Term View
62

Footnotes
1. For a more detailed description of the income index and the balance index, see
chapter 4 How the National Pension System Works.
63

7. Three Scenarios for the Future of the National
Pension System
This section is primarily based on calculations made using the Swedish
Pensions Agencys Pension model. The agencys Typical-case model has also
been used. These models may be found on the agencys website. Projections
of the pension system are as usual based on the system’s financial position
at the latest year-end. Last year, there were concerns that the Covid-19
outbreak would have a major impact on the financial position of the pension
system. However, pension contributions for 2020 were slightly higher than
2019 despite rising unemployment, and the market value of AP funds on 31
December 2020 was higher than in 2019. The higher mortality rate among
the elderly is not captured by the model simulations, being based on
demographic assumptions from previous years generated by Statistics
Sweden.
The long-term financial position of the inkomstpension system is described
below in three different projections, or scenarios. These are referred to as
the base, optimistic and pessimistic scenarios.
There is also an alternative baseline scenario in which retirement ages
follow the expected recommended retirement age.
The following three aspects of financial position treated are:
Net contribution
Fund strength
Balance ratio
The net contribution is the difference between the system’s contribution
revenue and pension disbursements. For a better comparison, the net
contribution is expressed in the scenarios as a percentage of total paid-in
contributions; this adjusts for the volume effect of long-term economic
growth. The net contribution is currently -10.4 percent.
To show how different developments can affect the long-term financial position of
the national pension system and the size of pensions, projections are presented for
the evolution of the pension system over the next 75 years in.
•
•
•
64

The net contribution corresponds (after deduction for costs of administration
etc.) to the primary net lending of the system. Total net lending includes the
net return of the National Pension Funds, which consists of interest income
and dividends on shares.
Net lending contributes to the change in the size of the National Pension
Funds. In addition, there are upward and downward fluctuations, sometimes
considerable, in the market value of the securities held. In 2020, the total
return generated by the buffer funds (First – Fourth and Sixth AP Funds)
was SEK 133 billion.
Fund strength is the market value of National Pension Fund capital divided
by pension disbursements for the year. Fund strength shows how many
years of pension disbursements can be financed by the fund. For the year
2020 fund strength was 5.2 years.
The balance ratio is a measure that summarizes the financial position of
the inkomstpension system. The balance ratio is the ratio between the total
assets of the system and its liabilities. The assets consist of the contribution
asset with the addition of the market value of the National Pension Funds.
(For a more detailed discussion, see chapter 4 How the National Pension
System Works and Appendix B Mathematical Description of the Balance
Ratio). Calculated on the basis of assets and liabilities as of December 31,
2020, the balance ratio was 1.0824.
The future financial position of the inkomstpension system will depend on
the development of several demographic and economic factors. The three
scenarios studied differ in the following respects:
Demographic development
Change in average income
Return on the National Pension Funds
Table 7.1 Net Lending of the Inkomstpension System 
billions of SEK
2020
Primary net lending
Net contribution
Contribution
295
Pensions
-326
Total Net contribution
-31
Costs of administration etc., net
-2
Total Primary net lending
-33
Return
Interest income
8
Dividends on shares
17
Total Return
25
Net lending
-8
a. There may be some minor deviations from the National Accounts.
a
•
•
•
65

The detailed assumptions for the scenarios are presented last in this chapter
under the heading Assumptions in the Calculations for the Three Scenarios.
A key factor in demographic development is the number of contributors,
which is determined by the number of people of working age and the
proportion of these who have earned income or other pension-qualifying
and contributory income.
The development of the working-age population depends primarily on net
immigration and – in the longer term – the birth rate. The development of
the number paying contributions is of significance for the financial position
of the system. Pensions and the pension credit earned by the gainfully
employed are revalued annually by the change in average income (the
income index, or the balance index in years when balancing is activated). If
there is an increase in the number of people with incomes who are paying
contributions, the consequences will be that the net contribution, the buffer
fund and the balance ratio all increase.
The change in the average income of the economically active is of limited
importance for the net lending of the pension system, for pensions are linked
to the income index, which follows average income. A change in average
income results in corresponding changes in both contribution inflow and
pension disbursements. In principle, therefore, a change in average income
will have no effect on the relative net contribution. The value of the
inkomstpension will of course be heavily influenced by the change in the
income index.
The return on the National Pension Funds affects the size of the Funds and
thus fund strength and the balance ratio as well. The negative effect of weak
growth in the net contribution on fund strength and the balance ratio can be
offset by a high return on fund capital. In the base scenario, the real annual
return assumed is 3.25 percent; in the optimistic and pessimistic scenarios,
the respective returns assumed are 5.5 percent and 1.0 percent. A factor of
importance for both fund strength and the balance ratio is the difference
between the return and the average income. This is due to the fact that both
pension disbursements and the system’s pension liability grow at the same
rate as average income, whereas the market value of the National Pension
Funds grows with the return and is included in the numerator both for the
measure of fund strength and for the balance ratio. See Appendix B
Mathematical Description of the Balance Ratio.
In summary, the net contribution will be negative in the base and pessimistic
scenario for many years to come. Pension disbursements are thus forecast to
exceed contribution revenue for these scenarios.
As previously noted, the net contribution is the difference between
contribution revenue and pension disbursements in relation to contributions.
Since the birth cohorts in the population differ in size and have worked to
differing degrees, the contribution revenue and pension disbursements of the
system will vary over time. For a better comparison of the net contribution
in the three scenarios, the net contribution has been divided by the inflow of
contributions in the scenario.
This eliminates the volume effect of the
differing growth rates on the net contribution in monetary terms.
Net Contribution
66

The net contribution was negative for the first time in 2009 and is expected
to remain so for many years in the base and pessimistic scenarios. The
explanation is that the large birth cohorts of the 1940’s almost completely
have left the labour force and retired. The negative balancings of 2010, 2011
and 2014 appear in the diagram as improvements in the net contribution.
Around 2020 the net contribution begins to slowly improve and the
contribution deficit to slowly decrease. From 2038, income is expected to be
greater than expenditure in the base scenario. The principal reason is that the
large birth cohorts of the 1990s and the 2010s will be of working age at the
same time as the cohorts of the 1960s with pension disbursements will be
decreasing; see Figure 7.10 at the end of this chapter. If pension-related age
limits are raised in accordance with the proposals in DS 2019:2 (Raised Age
Limits in the Pension System and in Other Social Security Systems) and
occur under the conditions in Statistics Sweden’s population projection from
2020, the net contribution will be positive as early as 2024.  With each
increase in the recommended retirement age, net contribution grows and
then declines until the next increase in the recommended retirement age.
The decline is due to pension disbursements being higher than in the base
scenario due to retirement being postponed.
The effect of demography is also reflected in the peaks and troughs in the
figure above. The difference in timing of the peaks and troughs between the
pessimistic and other scenarios is due to different demographic assumptions.
In the pessimistic scenario, net contribution is negative throughout the
whole period, but in the optimistic scenario up until and including 2025 The
pessimistic scenario has low net immigration and reduced birth rate (see
Figure 7.10).
Contribution revenue less pension disbursements as a percentage of contribution revenue.
Figure 7.1 Net Contribution
1
67

The size of the buffer fund is expressed in terms of fund strength, that is, the
fund capital at year-end divided by pension disbursements for the year. Fund
strength shows how many years of pension disbursements the fund can
finance without additional contributions or return in the future. The different
development of the buffer fund in the three scenarios is due to differences in
net contribution and in the assumed return on the fund.
Fund strength has averaged 4–5 years since 1990. At the end of 2020, it was
5.2 years.
In the base scenario, fund strength increases as the contribution net is
assumed to have a positive development combined with the fact that the
funds’ return (3.25 percent) is expected to exceed average income growth
(1.8 percent). If retirement ages are raised concurrently with the
recommended retirement age, fund strength will be even higher because
net contribution will be positive earlier than in the base scenario with no
retirement age increases.
In the optimistic scenario, fund strength grows faster than in the base
scenario, which is explained by a stronger improvement in the contribution
net and a greater difference between fund return (5.5 percent) and average
income growth (2.0 percent). In 2028, fund size corresponds to 7 years of
pension disbursements.
In the pessimistic scenario, average income growth is equal to as the fund
return (1.0 percent. Due to the unfavourable age composition, the fund will
be depleted by 2083 and will continue to drop.
Size of buffer fund divided by pension disbursements the same year.
Figure 7.2 Fund Strength
The Buffer Fund – Fund Strength
68

The financial position of the inkomstpension is expressed in terms of a ratio:
the system’s assets in relation to pension liabilities (see the section A Rate
of Interest Other Than the Income Index – Balancing in chapter 4 How the
National Pension System Works). When the ratio is less than one, liabilities
exceed assets. A ratio of 2.0 means that assets are twice as great as liabilities
and that the system in principle is fully funded, that is, the buffer fund, the
contribution asset and the pension liability are of equal size.
In 2010 balancing was activated, and it ended in 2018. When balancing is
activated, “interest” is credited to pensions and pension balances through the
change in the income index and the balance ratio. As long as balancing is
activated, the cumulative indexation is less than it would have been without
balancing but in the years the balance ratio is greater than 1 during a
balancing period, indexing is greater than that of the income index.
In the base scenario the balance ratio is greater than 1 throughout the
projection period. In the base scenario the balance ratio strengthens
gradually because of demographic factors and the fact that the return on the
buffer fund is greater than the income index. The balance ratio reaches 1.1
around 2024, a level that according to the proposal in “Utdelning av
Overskott i inkomstpensionssystemet” (Distribution of Surpluses in the
Inkomstpension System, (SOU 2004:105) would mean that there were
distributable surpluses. However, no such proposal has been presented to the
Swedish Parliament.
In the recommended retirement age alternative and the baseline scenario,
the curves follow each other because the assumptions are the same and the
increase in pension credit implies an equal increase in pension liability.
(Contribution asset + buffer fund) / pension liability
Figure 7.3 Balance Ratio
The Balance Ratio
69

In the optimistic scenario the balance ratio is also greater than 1 throughout
the projection period. As of 2023 the balance ratio exceeds 1.1.
In the pessimistic scenario, the balance ratio lies between 0.981 and just
over 1 throughout the whole projection period. A new balancing period will
occur in 2044. After 2069 and for some years following, the balance ratio
will be just over one but then it will drop again.
The figure for the balance ratio does not show the damped balance ratio but
the balance ratio as a measure of the financial position of the pension
system. The damped balance ratio is that which in combination with the
income index affects the upward adjustment of pensions and pension
balances during balancing periods. The effects of this are shown in the table
for the Cumulative balance ratio product and in Figure 7.4. The balancing
period that starts in 2044 in the pessimistic scenario continues throughout
the whole projection period, despite the balance ratio being temporarily
greater than one at the end of the 2060s.
In addition to projections of the development of the distribution system, the
Swedish Pensions Agency has calculated the development of premium
pension during the same period. The scenarios are the same: base,
optimistic, pessimistic, and base alternative with recommended retirement
age increases.
Somewhat simplified, the calculation is based on the premise that premium
pension return is evenly distributed for different ages, and that it remains
constant throughout the simulation period. Of course that is not realistic.
The variation from year to year is likely to resemble the high variation that
has been seen historically. Nevertheless, since the purpose of the calculation
Balance Index / Income Index
Figure 7.4 Adjusted Balance Index
Premium pension
70

is to demonstrate long-term, average features, it ignores the expected
volatility.
All three scenarios have the same historical development of premium
pension fund return up to and including the starting year for the projections.
The average time-weighted fund return from the start of the premium
pension in 1995 up to 2020 amounts to 5.4 percent. Fund return is then
assumed to be the same as in the optimistic and pessimistic scenarios’
assumption of real buffer fund return. This means 5.5 percent for the
optimistic and 1.0 percent for the pessimistic scenario. In the base scenario,
premium pension return is 3.90 percent. In addition, inflation is 2.0 percent.
As well as return on premium pension, there is an assumption of annual
interest in the so-called temporary administration, the time from when the
pension premium is paid by the employer or the state until it is placed in the
pension saver’s account. This covers an approximate time span of 18
months. The interest rate during temporary administration is assumed to be
nominally 2.75 percent in the base scenario , 3.0 percent in the optimistic
scenario and 1.0 percent in the pessimistic scenario. In addition to the return
on capital, the premium pension accounts are charged an administration fee
that is assumed to be 0.39 percent of premium pension capital per year.
The premium pension system is relatively young compared to most pension
systems. Earnings did not start until 1995. Only persons born in 1938 or
later have been able to earn a premium pension. For those born in 1938 only
4/20 of their earnings went to the income and premium pension system and
the rest went to ATP. From 1995 to 1998, the fee deduction was 2 percent
instead of the current 2.5 percent, which meant that the lowest actual
provision was then 0.4 percent of the pension base. However, the system is
growing rapidly. People born in 1970 were 25 years of age when payments
to the system began. As they approach retirement age around 2035-2040,
they will have been able to earn premium pension credit throughout most of
their active lives. By 2060, most pensioners will have been able to earn
premium pension for the whole of their professional lives and the premium
pension will then have reached its mature phase.
An illustrative measure of the mature phase of the system is net
contribution, that is, the difference between system income and pension
disbursements. This is divided in the same way as for contributions.
2
71

Net contribution is almost 100 percent at the outset because the volume paid
out is vanishingly small. The more today’s younger cohorts start to retire,
the more disbursements will negatively affect net income in the system.
When the system has been phased-in, after the year 2060, net contribution in
the pessimistic scenario will begin to hover around zero. In this scenario, no
return is given apart from wage growth; instead, the variations in net
contribution follow demographic variations in different birth-year cohorts.
In assumptions of higher return than wage growth, annual disbursements
from the premium pension system will exceed annual pension contributions
flowing in. Higher return will facilitate more pension disbursements, leading
to a more negative net contribution. The return is an extra inflow of funds to
be paid out. In the optimistic scenario there is excess return, about
3.3 percent (5.5 - 2.0 - 0.39) per year after costs. Assuming lifelong savings,
each premium payment will then be worth 2-3 times more than it would be
without the excess return. The high variation in return that is usually linked
to high risk-taking is not apparent here. A more complete picture would also
show the effect of variations in return.
Another way of looking at the maturity of the system is to study the total
size of premium pension funds. During the build-up phase, the premium
pension fund is relatively small. For a given birth-year cohort, the system is
mature if the individuals have been able to earn premium pension credit
throughout their working lives. The system is mature in its entirety when it
consists entirely of such cohorts. If all cohorts were the same size, had the
same income relative to the current income level, followed each other’s
mortality patterns and if their excess return over and above wage growth
only corresponded to the deducted administration fee, annual pension
disbursements would be equal to the total annual pension premium. Fund
assets would then stabilize at approximately 32-33 times the annual
premium contribution. The closest we can get to this situation is in the
Contribution revenue less pension disbursements as a percentage of contribution revenue.
Figure 7.5 Net Contribution Premium Pension
72

pessimistic scenario shown in Figure 7.6 where population growth is
subdued and excess return is zero. The total size of the premium penison
funds then becomes 33 years’ worth of contributions, which corresponds to
the expected average time each contribution remains in the fund between
payment and withdrawal.The 33 years of contributions corresponds to the
expected average time that each contribution is in the fund between payment
and disbursement. The fund may be viewed as a 33-year-long sequence of
annual payments which only grow with national wage growth. The same
amount paid into the funds each year in the form of contributions flows out
in the form of disbursements. Since all individuals sooner or later transition
from an active working period to life as a pensioner, approximately the same
amount is transferred each year from the savings phase to the payment
phase as payments in and out.
Both the baseline and the optimistic scenarios lead to a significantly larger
premium pension fund due to the higher excess return assumptions. The
premium pension fund is growing faster than contribution income. This will
result in higher pension disbursements, as indicated in Figure 7.5.
Figure 7.6 can be said to show the fund strength, the size of funds relative to
the size of contributions. At an early stage in the history of the premium
pension system, without disbursements and excess returns, the fund strength
corresponds in principle to the number of contribution years.
Another way to present the future role of the premium pension is to show it
as a proportion of the total national pension. Earning for premium pension
began, as noted, in 1995. This means that cohorts who retire today receive
only a small part of their pension from premium pension. The phasing-in
will continue until 2040–2050, meaning that an ever increasing share of the
pension will be paid from premium pension funds. Of today’s contributions
13.5 percent (2.5 / 18.5) go to premium pension. Without excess returns, this
Figure 7.6 Size of Premium Funds in Relation to Contributions Received during the Corresponding Year
73

results in pension disbursements being paid in the same proportion.
Assuming an excess return, the picture changes. In the base scenario,
premium pension accounts for approximately 22 percent of the income-
based national pension. In the optimistic scenario, the same proportion is
just over 30 percent.
Below is an account of how the pension develops relative to earned income
for typical cases born in the years 1954–2020 using the three different
scenarios. The effect of the scenarios on pension level has been streamlined
inasmuch as pensions have been calculated for an individual who starts
working at the age of 23 and retires at the so-called recommended
retirement age - the age when national social insurances (unemployment
insurance, sickness benefit etc.) cease and basic protection for the elderly
comes into play. Income for typical cases increases with national income
growth. Pension level is the national pension at the recommended retirement
age in relation to average salary during the final five years of pension
earning.
Note that the recommended retirement age today is 65 years and is
expected to be raised to 66 years in 2023. It is affecting the 1958 birth
cohort which will thus not be entitled to basic protection at age 65. In 2026,
the recommended retirement age is expected to be raised again by one year
to age 67, affecting those born in 1960. Thereafter, the recommended
retirement age will be increased by about two-thirds of the increase in life
expectancy. However, this will happen with some time lag, and gradually.
Figure 7.7 Premium Pension as a Proportion of the Earnings-Related Public Pension
Development of Pension Levels for Typical Cases
74

The scenarios’ pension levels at the recommended retirement age are shown
in the figure above, one for each scenario. The figure also demonstrates the
life expectancy effect. This constitutes total income-based national pension
received when typical cases postpone their retirement sufficiently to fully
compensate for the negative effect of increased life expectancy on the
monthly pension. Increased life expectancy refers to the period since 1994
when the inkomstpension and premium pension system was introduced.
Prolonged working life results in a higher pension due to the earning of new
pension credit, return on pension capital, a lower annuity divisor in the
calculation of the pension, as well as inheritance gains.  In the figure above,
the pension level typical cases reach at the higher retirement age required to
compensate for the life expectancy effect, has been marked in light gray.
In the baseline scenario, the pension level decreases gradually after each
increase in the recommended retirement age, and increases again as the
recommended retirement age approaches. The increase is due to the fact that
the latter cohort typically works an additional year. The long-term the trend
is declining pension levels. One reason is the return: older cohorts with a
longer pension history generally have a higher return than the assumed
future return. Another reason for lower pension levels is the fact that
reduced risk of death applies to all ages, from 18 to recommended
retirement age, thus giving lower inheritance gains, while the change in
recommended retirement age only takes into account increased life
expectancy after the age of 65. People born in 1954 need to work until age
67 and 6 months to compensate for the diminishing effect of life expectancy
on the monthly amount of their pension.
At that retirement age, the pension
is estimated to be around 57 percent of final salary income. The declining
pension level despite neutralization is due as noted to the lower average
return for younger people. If working life is prolonged so that the effect of
increasing life expectancy on pension level is neutralized, the pension level
stabilizes at around 56 percent in the base scenario.
Figure 7.8 Pension in Proportion to Final Earnings, Different Birth Cohorts
3
4
75

In the optimistic and pessimistic scenarios, growth in average income is
higher respectively lower than in the base scenario, as also return on
premium pension.
Balancing was discontinued in 2018 and is no longer activated. The
inkomstpension is compounded (indexed) with the change in the average
income in society. In this case, the ratio of the inkomstpension to final salary
is not affected by real wage growth. The inkomstpension as a percentage of
final salary remains unchanged. On the other hand, inkomstpension will of
course be lower/higher in SEK terms in the event of lower/higher growth.
The relationship between the return of the premium pension system and the
increase in average income affects the relative size of the premium pension.
The larger the positive discrepancy between return and wage growth, the
greater the share constituted by the premium pension. Pension level
increases for typical cases if they have an occupational pension. The size of
the occupational pension depends on the occupational area, but is around
20–25 percent of the pension at recommended retirement age, which raises
the pension level from just over 50 percent to approx. 70 percent.
Table 7.2 below shows, among other things the life expectancy for persons
at age 65 for birth cohorts 1930–2020. Remaining life expectancy at the age
of 65 is expected to increase from 17 years and 5 months for persons born in
1930 to 25 years and 10 months for persons born in 2020, an increase of 8
years and 5 months. If those born in 2020 are to have the same pension level
that they would have had if life expectancy had not increased, a portion of
the increased life span after age 65 must be devoted to working longer. For
the cohort born in 2020, working life must be extended to 72 years and 1
month. This measure is called the alternative retirement age. During 2017,
the Swedish Pensions Agency changed its formula for alternative pension
age.  However, in the Swedish government proposal DS2019:2, “Hojda
aldersgranser i pensionssystemet och andra trygghetssystem” (Raised age
limits in the pension system and in other social security systems), another
formula is proposed (normal pension age) giving a lower retirement age
than the alternative retirement age and thereby a lower level of
compensation since it does not take into account changes in life expectancy
before the age of 65. At the same time, those born in 2020 – despite such a
higher retirement age – may look forward to being pensioners 3 years and 0
months longer than those born in 1930.
5
Life Expectancy Effect and Alternative Retirement Age
76

In table 7.3 and in figure 7.9, the various assumptions in the scenarios are
summarized.
Table 7.2 Recommended retirement age, alternative retirement age and time as retired
Birth cohort
born in
… reaches 65
in
Life exp-
ectancy at 65
Expected rec.
age
Time spent
retired
… compared
to birth cohort
1930
Alternative
Retirement
Ages
1930
1995
82 yr 5 m
65 yr
17 yr 5 m
0 yr 0 m
65 yr 0 m
1935
2000
83 yr 1 m
65 yr
18 yr 1 m
0 yr 8 m
65 yr 7 m
1940
2005
83 yr 6 m
65 yr
18 yr 6 m
1 yr 2 m
66 yr 1 m
1945
2010
84 yr 3 m
65 yr
19 yr 3 m
1 yr 10 m
66 yr 8 m
1950
2015
84 yr 10 m
65 yr
19 yr 10 m
2 yr 5 m
67 yr 2 m
1955
2020
85 yr 4 m
65 yr
20 yr 4 m
2 yr 11 m
67 yr 8 m
1960
2025
85 yr 10 m
67 yr
19 yr 2 m
1 yr 9 m
68 yr 0 m
1965
2030
86 yr 5 m
67 yr
19 yr 9 m
2 yr 4 m
68 yr 5 m
1970
2035
86 yr 11 m
68 yr
19 yr 4 m
1 yr 11 m
68 yr 10 m
1975
2040
87 yr 4 m
68 yr
19 yr 9 m
2 yr 4 m
69 yr 3 m
1980
2045
87 yr 10 m
68 yr
20 yr 2 m
2 yr 9 m
69 yr 7 m
1985
2050
88 yr 3 m
69 yr
19 yr 9 m
2 yr 4 m
70 yr 0 m
1990
2055
88 yr 8 m
69 yr
20 yr 1 m
2 yr 8 m
70 yr 4 m
1995
2060
89 yr 0 m
69 yr
20 yr 6 m
3 yr 1 m
70 yr 7 m
2000
2065
89 yr 5 m
70 yr
19 yr 11 m
2 yr 7 m
70 yr 11 m
2005
2070
89 yr 10 m
70 yr
20 yr 4 m
2 yr 11 m
71 yr 3 m
2010
2075
90 yr 2 m
70 yr
20 yr 8 m
3 yr 3 m
71 yr 6 m
2015
2080
90 yr 6 m
70 yr
21 yr 0 m
3 yr 7 m
71 yr 10 m
2020
2085
90 yr 10 m
71 yr
20 yr 4 m
3 yr 0 m
72 yr 1 m
a. Time spent retired refers to expected remaining life span at expected recommended retirement age.
a
Table 7.3 Bases for Calculation
percent
Base
Pessimistic
Optimistic
Inflation
2.00
2.00
2.00
Change in average income
1.80
1.00
2.00
Real return, net, after fees to fund management companies
Premium pension funds
3.90
1.00
5.50
Buffer fund
3.25
1.00
5.50
National Debt Office
2.75
1.00
3.00
Assumptions in the Calculations for the Three Scenarios
77

The demographic development in the base scenario follows the latest
official population forecast of Statistics Sweden from 2020. There it is
assumed that nativity will eventually stabilize at 1.86 children per Swedish-
born woman. The average life span for men born in 2020 is 81.5 years and
is expected to increase to 85.4 years in 2050. For women the average life
span is expected to increase from 84.8 to 87.8 years during the same period.
For the remainder of the time until the end of the projection period in 2094,
the average life span will increase by approximately 4 years for both men
and women. The 2020 population projection has a total net immigration of
250,000 people in the next 5 years. Subsequently net immigration drops by
a few thousand persons per year to stabilize at just over 20,000 people per
year. This year’s assumption for the base scenario is constant employment,
that is to say, future employment is the same as today. The reason for this is
that Statistics Sweden’s main alternative implies future employment
increases in the older section of the population. This can now be controlled
instead in the Pension Agency’s pension model with pension age increases.
Real average income is expected to increase by 1.8 percent per year. The
buffer fund’s real return is assumed to 3.25 percent per year. As of 2020, the
minimum retirement age is 62 years.
For the base scenario with recommended retirement age increases,
everything is the same except the chance to retire is postponed by a whole
year. This means that the cohort affected by the higher recommended
retirement age works for another year and those with transfers also receive
these for another year. Since the mortality rate is the same, the time as a
pensioner is reduced by one year.
Figure 7.9 Population for 1945, 2020 and projection for 2095 in the three scenarios
Base scenario
78

The demographic assumptions do not follow the base scenario and are based
on Statistics Sweden’s forecasts from 2018. Both nativity and net
immigration are higher than in the base alternative. In the long run, nativity
is estimated at 2.06 children per Swedish-born woman. Long-term
immigration is assumed on average to show a surplus of some 70,000
persons per year. Mortality is assumed to be constant and to retain the same
2019 values throughout the whole of the forecast period. Assumptions
regarding employment are the same as in the base scenario. The real growth
in average income is 2.0 percent after 2020, and the real rate of return on the
buffer fund is assumed to be 5.5 percent per year in the future. The real
return for the premium pension is also assumed to be 5.5 percent before
costs of administration. The temporary administration of the premium
pension at the Swedish National Debt Office is assumed to yield an interest
rate of 3.0 per cent. As of 2020, the minimum retirement age is 62 years.
The assumptions in the pessimistic scenario about birth rates and net
immigration are lower than in the base alternative. Nativity is assumed to be
about 1.65 children per Swedish-born woman. Net immigration is negative
during the period 2022–2056, later rising to approximately 5,000 per year.
In the pessimistic scenario life expectancy increases faster than in the base
scenario. Remaining life expectancy increases from 84.5 years for women to
89.4 years in 2050 and 95.0 years in 2095. The corresponding figure for
men is an increase from 81.3 to 87.3 and finally 93.5 years. The proportion
employed is assumed to remain unchanged for the time ahead. The real
growth in average income is assumed to be 1 percent per year. The real rate
of return for the Buffer Fund, the National Debt Office and the premium
pension funds is also assumed to be 1 percent per year. With a return equal
to the growth in average income, the return of the buffer fund does not, in
principle, contribute to the long-run financing of pensions. The buffer fund
is then demographically determined and serves as a neutral repository of
pension capital for the purposes of the system’s financing. The assumptions
in the pessimistic scenario mean that the contribution flow grows slowly in
relation to the desired indexation of the average income. The pessimistic
scenario describes how pensions are affected by a prolonged weak
development with an unfavorable age structure. As of 2020, the minimum
retirement age is 62 years.
Optimistic scenario
Pessimistic scenario
79

The diagram shows the development of the population since 1930 and the assumptions for 75 years into the
future. The large birth cohorts of the 1940’s, 1960’s, 1990’s and 2010’s are evident. The number dying increases
each year, not because of rising mortality, but because of a growing population. The peak years of immigration are
the 1960’s and 1970’s, when there was substantial immigration of labour, particularly from Finland. There was
another peak at the outset of the 1990’s, when many refugees arrived, primarily from ex-Yugoslavia. The large
immigrant cohorts in recent years are also reflected in the diagram.
Figure 7.10 Births, Deaths, Immigration and Emigration, 1930–2020, and Assumptions Through 2095
Description of the Assumptions in the Scenarios
80

The total population increases in both the positive and base scenarios, the reasons being a high birth rate and net
immigration. The number of persons over 65 is more or less the same from one scenario to another. The historical
data are estimates.
Figure 7.11 Size of Population
For the three scenarios the support ratio is calculated as the number of persons aged 20–64 years divided by the
number aged 65 or older. The support ratio for the base scenario has also been calculated with alternative
retirement ages instead of age 65 as a limit. For this curve, a smoothed mean value for the burden of support is
used.
Figure 7.12 Support Ratio During 1960–2020 and Projection According to Statistics Sweden’s Three
Scenarios for 2019–2095
81

Figure 7.12 shows the support ratio for the elderly for the three scenarios
and for the base scenario with recommended retirement age increases. With
each increase in the recommended retirement age, one cohort is moved from
belonging to the elderly to belonging to the gainfully employed, leading to a
temporary increase in the support ratio for the elderly. For the base and the
pessimistic scenarios with a fixed age limit of 65, there is a steadily
declining support ratio for the elderly. The pessimistic scenario stands out
with almost 1.35 persons of working age per old person at the end of the
simulation period. This is due to unfavourable demographics with
increasing life spans, low net immigration combined with low fertility.
The historical return of the buffer fund for the last 60 years. The point between the vertical lines is the median
value. The starting point for the upper vertical line is the 75th percentile; the ending point is the maximum value.
The starting point for the lower vertical line is the 25th percentile; the ending point is the minimum value.
Figure 7.13 Real Return on the Buffer Fund, 1960–2020, and Assumptions until 2095
82

The development of real earnings for the last 60 years. The point between the vertical lines is the median value.
The starting point for the upper vertical line is the 75th percentile; the ending point is the maximum value. The
starting point for the lower vertical line is the 25th percentile; the ending point is the minimum value. Source:
Swedish National Mediation Office
Figure 7.14 Real Growth in Earnings, 1960–2020, and Assumptions until 2095
83

Footnotes
1. The pension model uses a naive assumption that when the recommended
retirement age is raised, the insured postpone their retirement by a full year.
The gainfully employed thus work a full extra year and receive one year less
of pension disbursements. This is unlikely to happen in real life.
2. The costs, 0.39 percent, are higher from this year forward since they
previously consisted only of the Pension Agency’s contributions. Furthermore,
from this year the average fund charge is also included, which was 0.21
percent in 2020.
3. Inheritance gain can be seen as compensation for the risk of the typical case
not surviving until retirement and thus not receiving part of the pension due.
4. Note that the outcome also depends on the phasing-in of the system (1995 was
the first year it was possible to earn pension credit in the premium pension
system, and at the end of 2001 the fund marketplace was opened for individual
fund choice).
5. Report from 2017: Formula for an alternative retirement age
84

8.
Notes and Comments
In the national pension system there are a number of different contributions,
as can be seen in table 8.1. Not all contribution revenue goes to the pension
system. The part of old-age pension contribution transferred to the central
government budget is that part of income above the ceiling on pension-
qualifying income. Before deduction for general pension contribution this
ceiling is 8.07 income-related base amounts, and after such deduction it is
7.5 income-related base amounts. Since these contributions do not
correspond to any pension credit, they are in fact taxes. The old-age pension
contribution is paid by employers and self-employed persons; the general
pension contribution is paid by all gainfully employed persons who thus
earn pension credit. In addition, national old-age pension contributions are
paid from various appropriations in the central government budget for
pension credit resulting from certain transfer payments such as sickness
benefit and unemployment cash benefit. The central government also pays a
pension contribution for so-called pension-qualifying amounts, for years
with small children and for study, for example.
Table 8.1 on the next page shows pension contributions received during the
income year by the Swedish Social Insurance Agency and the Swedish
Pensions Agency. Employer contributions or self-employment contributions
are entered in the Social Insurance Agency account. The contributions for
the inkomstpension system are transferred to the Swedish Pensions Agency
and thereafter to the National Pension Funds. Those contributions calculated
to correspond to pension credit for premium pension are forwarded to the
National Debt Office. The general pension contribution and the general
government old-age pension contribution are entered in the Swedish
Pensions Agency account before being transferred to the National Pension
Funds and the premium pension system respectively. Of the contributions
registered in a particular year, a portion relate to the preceding year or, in
some cases, to several years earlier. Employer contributions, for example,
are registered at least one month after the corresponding salaries are paid.
The general pension contribution is transferred in its entirety to the National
Pension Funds. For employer contributions and self-employment
contributions, there is a preliminary allocation among the National Pension
Funds, the premium pension system and the central government budget. The
allocation for a year is made according to set percentages calculated by the
Swedish Pensions Agency and set by the Government. It is intended that the
premium pension system should receive in the course of a year contributions
equivalent to premium pension credit earned during that year while the state
Note 1 refers to both inkomstpension and premium pension. Notes 2–14 refer to
inkomstpension and notes 15–25 refer to premium pension. All amounts are stated
in SEK million. In some tables, the sum of the secondary level items does not tally
with the total due to rounding.
Notes and Comments Regarding the Pension Contributions
Note 1 Pension Contributions
85

receives contributions corresponding to taxable earnings over the so-called
ceiling of 8.07 of the income-related base amount. Remaining contributions
are to go to the National Pension Funds. National old-age pension
contributions for a year are similarly distributed between the National
Pension Funds and the premium pension system according to fixed
percentages.
To ensure that the premium pension system has received contributions
corresponding to the pension credit earned for a particular year and that the
central government budget has received contributions for the part of
incomes above the contribution ceiling, any discrepancies are reconciled
two years later. Adjustments are then made between the national budget,
premium pension and the inkomstpension system (the National Pension
Funds). The settlements mean that contribution revenue is redistributed
between the premium pension system, the central government budget and
the National Pension Funds, ensuring that the first two receive the correct
amount for a year’s contributions while the National Pension Funds receive
the remainder. Settlements are also made between the national pension
system and the various appropriations in the government budget charged
with national old-age pension contributions. This is to ensure that the
various appropriations pay the correct amount for national old-age pension
contributions. These settlements are made three years after the year they
apply to.
Table 8.1 Pension Contributions by Type, 2020 
millions of SEK
Inkomst-
pension
Premium
pension
Central
government
budget
Total 2020 Total 2019
Employer contributions
135,573
40,096
20,146
195,815
193,865
Contributions for the self-employed
3,168
936
473
4,577
4,433
General pension contribution
132,033
0
0
132,033
129,503
Central government old-age
pension contribution
24,999
4,103
0
29,102
25,440
Final settlements etc.
Final settlements in 2020
for 2018
-20
-44
64
0
0
Collection loss, settlement
-224
0
0
-224
-227
Adjustment to accounting of
National Pension Funds
and premium pension system
-30
636
0
606
625
Total Final settlements etc.
-274
592
64
382
398
Total
295,499
45,727
20,683
361,909
353,639
a. Contributions received by the Swedish Social Insurance Agency/the Swedish Pensions Agency in 2020 and
transferred to the National Pension Funds, the premium pension system and the central government
budget, respectively.
a
86

Contribution revenue to the inkomstpension system increased between 2019
and
2020 by SEK 6.1 billion (2.1 percent), which is a relatively low increase
but greater than the change in the sum of wages and salaries (0.8 percent).
The difference between the National Pension Funds’ reporting of
contribution revenue and that of the Swedish Social Insurance Agency and
the Swedish Pensions Agency (SEK -30 million) can be explained largely
by periodization differences. The difference between reported contribution
revenue in the premium pension system and that reported by the Swedish
Social Insurance Agency/the Swedish Pensions Agency (SEK 636 million)
is partly due to certain adjustment amounts being included in the amount for
the premium pension system (see Note 18).
Figure 8.1 Pension Contributions
Table 8.2 A Pension Contributions, Excluding Settlements etc. Allocated by Type of Contribution Base,
2020 
millions of SEK
Employer, self-
employed, and centr.
govt. pension
contribution
General pension
contribution
Total
Earned income
200,392
123,045
323,437
Transfer payments, see Table B
13,131
8,988
22,119
Pension-qualifying amounts, see Table C
15,971
0
15,971
Total
229,494
132,033
361,527
a. The allocation of the general pension contribution between the two types of contribution base is estimated
and is not shown in the accounting systems.
b. Including sick pay and self-employment income, excluding transfer payments.
a
b
87

The general pension contribution is 7 percent on earned income and
pension-qualifying transfers such as sickness benefit, etc., but not sickness
and activity compensation. The general pension contribution is only charged
on income up to the tax ceiling of 8.07 income base amounts and for
incomes above 0.423 price-related base amounts. At the time of tax
assessment, a tax deduction is made corresponding to the general pension
contribution. In practice, this means that the state finances the contribution.
The pension contribution paid by employers and self-employed on earned
income, and by the central government on the above-mentioned transfer
payments, is 10.21 percent. The central-government pension contribution on
sickness and activity compensation and on so-called pension-qualifying
amounts, which are not subject to the general pension contribution, is
18.5 percent.
The allocation in Table 8.2 A refers to the contributions received by the
Swedish Social Insurance Agency or the Swedish Pensions Agency in 2020.
Table 8.2 B Pension Contributions for Transfer Payments, 2020 
millions of SEK
Cent. govt. pension
contrib.
General pension
contrib.
Total
Sickness cash benefit
4,049
2,772
6,821
Rehabilitation cash benefit
0
0
0
Allowance for care of close relatives
16
11
27
Work injury compensation, etc.
195
133
328
Parental insurance
4,423
3,027
7,450
Care allowance
399
273
672
Unemployment cash benefit etc.
3,991
2,732
6,723
Educational allowance
0
0
0
Artists’ Board
7
5
12
Allowance to disease carriers
51
35
86
Total
13,131
8,988
22,119
a. The allocation of the general pension contribution among the different types of transfer payments is
estimated and is not shown in the accounting systems.
a
88

During the year, SEK 326,257 million was paid out in pensions from the
National Pension Funds, an increase of SEK 11.5 billion (3.4 percent). In
2019, disbursements increased by SEK 10.3 billion or 2.9 percent. Pension
disbursements of just over SEK 326 million reduced pension liability to
pensioners by a corresponding amount. According to the Act (2002:125) on
Transfer of Pension Credit to and from the European Communities (EC), the
value of pension credit for EC officials can be transferred from the National
Pension Funds and the premium pension system to the service pension
system of the EC. In 2020, more than SEK 9 million was transferred from
the National Pension Funds.
Table 8.2 C Pension Contributions Paid for Sickness/Activity Compensation and
Pension-Qualifying Amounts, 2020
millions of SEK
Sickness and activity compensation
5,196
Amounts credited for years
with small children
7,565
Amounts credited for study
3,105
National service
105
Total
15,971
a. Amount refers to contributions for disbursements of both pension-qualifying
benefits and pension-qualifying amounts. In both cases the contribution is 18.5
percent.
b. A minor portion of amounts credited for study consists of pension-qualifying
income.
a
b
Table 8.3 ATP and Inkomstpension Disbursements and Amounts Transferred to the European Community
millions of SEK
2019
2020
Pension disbursements
ATP disbursements
162,584
157,153
Inkomstpension disbursements
152,140
169,104
Total Pension disbursements
314,724
326,257
Transfers to European Communities
0
9
Total
314,724
326,266
Notes and Comments Regarding the Inkomstpension
Note 2 Pension Disbursements etc.
89

The item Commission Expenses comprises fees which are not result-based.
Result-based charges, brokerage fees and other expenses have reduced the
return (see chapter 5 Costs of Administration and Capital Management).
Table 8.4 Return on Funded Capital of the First–Fourth and Sixth National Pension Funds, 2020 
millions of SEK
First
Second
Third
Fourth
Sixth
*
Total
2020
Total
2019
Stocks and shares
Dividends received
2,932
4,214
4,375
5,002
10
0
16,533
23,649
Gain/-loss, listed
and unlisted 
stocks and 
shares, net
33,537
20,457
32,652
41,186
7,570
0
135,402
168,143
Total Stocks 
and shares
36,469
24,671
37,027
46,188
7,580
-1
151,934
191,792
Bonds and other interest-bearing securities
Net interest
1,568
2,956
2,149
1,489
17
0
8,179
10,937
Gain/-loss, inte-
rest bearing
assets, net
2,968
3,757
3,370
2,829
0
0
12,924
16,710
Total Bonds
and other interest-
bearing securities
4,536
6,713
5,519
4,318
17
-1
21,102
27,647
Other investments
Gain/-loss, 
derivatives, net
2,701
-2,063
-122
280
0
0
796
-1,661
Net foreign-
exchange gain/-loss
-8,624
-16,033
-4,897
-11,079
141
0
-40,492
23,266
Costs of commissions
-76
-277
-126
-138
0
0
-617
-739
Total Other 
investments
-5,999
-18,373
-5,145
-10,937
141
-1
-40,314
21,618
Total
35,006
13,011
37,401
39,569
7,738
-3
132,722
240,318
a. Adjustment column (*) is included to adjust for various rounding effects.
a
Note 3 Return on Funded Capital
90

For the funds, only internal administrative costs are reported. External costs
of administration and custodial fees are referred to as costs of commissions
and are reported as negative revenue (see Note 3). For all funds, result-
based charges, transaction costs etc. have reduced the return shown in Note
3 (see chapter 5 Costs of Administration and Capital Management).
Owing to phase-in provisions applicable until 2020, only a portion of
administrative costs (98 percent in 2020, see Note 11) is charged to the
pension balances of the insured. Each fund finances its costs of
administration by drawing on its own fund.
Table 8.5 Costs of Administration
millions of SEK
2019
2020
Costs of Insurance administration
Swedish Pensions Agency
335
397
Tax administration and other agencies
406
441
Total Costs of Insurance administration
741
838
Costs of fund administration
First National Pension Fund
238
226
Second National Pension Fund
240
235
Third National Pension Fund
212
222
Fourth National Pension Fund
231
246
Sixth National Pension Fund
95
89
Total Costs of fund administration
1,016
1,018
Total
1,757
1,856
a. Includes Enforcement Authority and the National Government Service Centre
a
Note 4 Costs of Administration
91

Contribution revenue increased by SEK 6 billion and the value of the
change in contribution income amounts to almost SEK 183 billion. Below
the value of the reduced turnover duration is given.
Table 8.6 Contribution Revenue 
millions of SEK
2019
2020
Change in contribution revenue
Contribution revenue 2020
295,499
Contribution revenue 2019
289,386
-289,386
Contribution revenue 2018
-278,217
Total Change in contribution revenue
11,169
6,113
(Turnover duration 2020 + 
Turnover duration 2019)/2
x 29.93450
(Turnover duration 2019 + 
Turnover duration 2018)/2
x 29.70323
Value of change in contribution revenue
331,755
182,990
a. Duration in years, x denotes multiplication.
a
Table 8.7 Turnover Duration 
millions of SEK
2019
2020
Change in turnover duration
Turnover duration 2020
30.09487
Turnover duration 2019
29.77413
-29.77413
Turnover duration 2018
-29.63233
Total Change in turnover duration
0.14180
0.32074
(Contribution revenue 2020 + 
contribution revenue 2019)/2
x 292,443
(Contribution revenue 2019 + 
contribution revenue 2018)/2
x 283,802
Value of change in turnover duration
40,243
93,798
a. Duration in years, x denotes multiplication.
a
Note 5 Value of Change in Contribution Revenue
Note 6 Value of Change in Turnover Duration
92

Turnover duration is calculated as the difference between the expected
payment age and income age, for more details see Appendix B –
Mathematical Description of the Balance Ratio. Since income age cannot be
calculated until all pension credit have been determined, the latest year for
which turnover duration can be calculated is the year before the accounting
year.
The bottom line of table 8.8, “Turnover duration for contribution asset
calculation”, shows which turnover duration has been used for each
financial year. Note, however, that the calculated balance ratio refers to the
reporting year + 2 years, namely the turnover duration 30.09487 for the year
2020 is used for the calculation of the balance ratio for the year
2022.Appendix B Mathematical description of the balance ratio – describes
how turnover duration is calculated.
New pension credit includes certain other adjustment amounts that affect the
size of the pension liability. What these amounts consist of is shown in the
following table.
Table 8.8 Basis for Calculating Turnover Duration
2016
2017
2018
2019
2020
Turnover duration
Income age
45.66774
45.90862
45.76243
45.68355
Payment age
75.52498
75.54095
75.53656
75.77842
Turnover duration
29.85724
29.63233
29.77413
30.09487
Turnover duration for 
contribution
asset calculation
30.13850
29.85724
29.63233
29.77413
30.09487
Note 7 New Pension Credit
93

Since the tax assessment for the year of the financial statements had not
been completed when the statements were prepared, the value of pension
credit earned during this year can only be estimated. The adjustments
affecting the size of pension balances also represent tax-assessment changes
etc.; see Table 8.21 A in Note 14. The change in disbursed amounts refers to
changes in the pension liability to retirees as a consequence of other changes
in disbursements than those due to indexation; see Table 8.21 C in Note 14.
Table 8.9 Value of New Pension Credit 
millions of SEK
2019
2020
Estimated inkomstpension credit earned
289,386
295,499
Adjustment amount, inkomstpension
Confirmed inkomstpension credit earned in t-1
277,960
287,823
Estimated inkomstpension credit earned in t-1
-278,217
-289,386
Adjustments affecting pension balances, etc.
-3,801
-3,805
Change in amounts disbursed
10,702
11,559
Total Adjustment amount, inkomstpension
6,644
6,191
Adjustment amount, ATP
Effect of difference between assumed value for 
year t and estimate for t-1 etc.
-81
-196
Change in amounts disbursed
6,546
2,900
Total Adjustment amount, ATP
6,465
2,704
Total
302,495
304,394
a. The table is reported after the income year
a
Table 8.10 Indexation, 2020
millions of SEK
Active
Retired
Total
Indexation of Pension Balance and Pensions
127,674
127,410
255,084
Change in Indexation regarding Pension Liability
84,651
0
84,651
Total
212,325
127,410
339,735
a. see Table 8.12 A
b. see Table 8.12.C
a
b
Note 8 Indexation
94

Pension liability changes with the change in the income index when
balancing is de-activated in the system. Balancing was activated 2010–2017
and pension liability then changed with the balance index. Since 2018,
liability changes with the income index. The value of the indexation is based
on projected pension liability in 2020.
Table 8.11 Indexation, 2019
millions of SEK
Active
Retired
Total
Indexation of Pension Balance and Pensions
212,785
100,347
313,132
Change in Indexation regarding Pension Liability
-44,277
0
-44,277
Total
168,508
100,347
268,855
a. see Table 8.12 A
b. see Table 8.12.C
a
b
Table 8.12 A Indexation of Pension Balance and Pensions, 2020
millions of SEK
Active
Retired
Total
Inkomstpension, indexation
Effect of income index
127,361
77,523
204,884
Effect of balancing
0
0
0
Total Inkomstpension, indexation
127,361
77,523
204,884
ATP, indexation
Effect of income index
313
49,887
50,200
Effect of balancing
0
0
0
Total ATP, indexation
313
49,887
50,200
Total
127,674
127,410
255,084
Table 8.12 B Indexation of Pension Balance and Pensions, 2019
millions of SEK
Active
Retired
Total
Inkomstpension, indexation
Effect of income index
212,201
57,049
269,250
Effect of balancing
0
0
0
Total Inkomstpension, indexation
212,201
57,049
269,250
ATP, indexation
Effect of income index
584
43,298
43,882
Effect of balancing
0
0
0
Total ATP, indexation
584
43,298
43,882
Total
212,785
100,347
313,132
95

The lifespan referred to here is the number of years that an average pension
amount is assumed to be paid out, the so-called economic lifespan or
economic annuity divisor. The method of calculating economic annuity
divisors is shown in Formula B.7.5 in Appendix B.
Inkomstpension liability for pensioners is not affected by changes by
lifespan changes.The average economic lifespan has increased, which
contributes to a higher pension liability for pensioners by just over
SEK 10 billion. Economic life expectancy has increased despite the
coronavirus pandemic because a three-year average is used, and economic
mortality was higher in 2017 than in 2020. The value of the change in life
expectancy is the difference between the pension liability calculated with
the economic annuity divisors used in the year of the financial statements,
Table 8.12 C Change in Indexation regarding Pension Liability, 2020
millions of SEK
Active
Retired
Total
Last year’s liability adjustment
210,488
0
210,488
This year’s liability adjustment
-125,837
0
-125,837
Total
84,651
0
84,651
Table 8.12 D Change in Indexation regarding Pension Liability, 2019
millions of SEK
Active
Retired
Total
Last year’s liability adjustment
166,211
0
166,211
This year’s liability adjustment
-210,488
0
-210,488
Total
-44,277
0
-44,277
Table 8.13 Value of the Change in Life Expectancy, 2020
millions of SEK
Active
Retired
Total
Inkomstpension
6,430
6,430
ATP
25
4,048
4,073
Total
25
10,478
10,503
Table 8.14 Value of the Change in Life Expectancy, 2019
millions of SEK
Active
Retired
Total
Inkomstpension
17,416
17,416
ATP
105
14,038
14,143
Total
105
31,454
31,559
Note 9 Value of the Change in Life Expectancy
96

and the pension liability calculated with the economic annuity divisors used
in the previous year.
In connection with the increase in the minimum retirement age, the age limit
for the allocation of inheritance gains was also changed as of 2020. Pursuant
to the rule change, the method for accounting amounts arising was reviewed
and the method for deriving accrued inheritance gains was changed. The
new method provides better coverage and therefore slightly higher amounts
than previously. The increase in the age limit and the change in method
make the years not fully comparable.
The pension balances of deceased persons (inheritance gains arising) are
distributed to the survivors of the same age. The distribution is made as a
percentage increase in pension balances according to an inheritance gain
factor.
The allocation is made according to two principles, the first of which relates
to the
younger group, and the second to the older group. Because the
minimum age to be granted pension was raised from 61 to 62 as of 2020, the
age limits for allocation have been adjusted.
Under the new rules, capital following death at age 60 or under will be
allocated the following year (previously this limit was 59). In the year of
allocation, those born in the same year as the deceased are one year older.
Inheritance gains factors are determined based on pension capital for the
deceased in relation to the pension capital of same-age survivors.
As of the year an age group turns 61, the estimated rather than the actual
inheritance gains arising are distributed. The inheritance gains factors are
calculated based on mortality observed by Statistics Sweden for a previous
period. The estimated inheritance gains of those who died in the 61st year of
life or later are distributed in the same year.
Table 8.15 Inheritance Gains, Arising and Distributed 
millions of SEK
2019
2020
Inheritance gains arising
61 years or older
5,748
5,436
59 years or younger
6,885
6,699
Total Inheritance gains arising
12,633
12,135
Inheritance gains distributed
61 years or older
8,851
7,947
59 years or younger
6,846
6,651
Total Inheritance gains 
distributed
15,697
14,598
a. Changes to the age limits for the allocation of inheritance gains mean that the years are not fully
comparable.
b. Died last year, distributed current year.
a
b
Note 10 Inheritance Gains Arising, Inheritance Gains Distributed
97

Allocation according to these two principles means that each year group in a
year will be allocated inheritance benefits under both principles because the
first principle assigns with delay. For 2020, however, this does not occur, as
those born in 1959 have already been allocated according to both principles
in 2019.
Costs of administration are financed by a percentage deduction from the
pension balances of the insured. In order to avoid charging a
disproportionately high cost to younger birth age groups during the period
when the ATP is being phased out, this administrative cost deduction is
being introduced in steps. In 2020, 98 percent of administrative costs were
financed by a deduction from pension balances. This deduction will increase
by 2 percentage points each year and thus will not cover 100 percent of
administrative costs until 2021.
The calculation of the administrative cost factor is based on budgeted costs
of administration, costs of the National Pension Funds for the current year
and the pension balances for the preceding year (see Appendix A). The
difference between the monetary amount of the deduction made and the cost
confirmed is considered in the in the calculation of the administrative cost
factor for the following year. The deduction for administrative costs is made
by multiplying pension balances by the administrative cost factor. The
deduction in 2020 was 0.0305 percent and totalled SEK 1,818 million. The
previous year, the deduction amounted to 0.0288 percent or
SEK 1,673 million.
Table 8.16 Deduction for Costs of Administration
millions of SEK
2019
2020
Deduction for Costs of Administration
1,673
1,818
Note 11 Deduction for Costs of Administration
98

Table 8.17 Assets and Liabilities of the Buffer Fund, 2020
millions of SEK
First
Second
Third
Fourth
Sixth
Total 2020
Total 2019
Assets
Stocks and shares
Swedish stocks
108,592
57,697
115,416
131,131
9,305
422,141
357,339
Foreign stocks
169,198
192,669
173,671
190,918
32,806
759,262
692,061
Total Stocks and 
shares
277,790
250,366
289,087
322,049
42,111
1,181,403
1,049,400
Bonds and other interest-bearing securities, net
Swedish bonds
38,009
20,514
31,285
35,438
282
125,528
141,698
Foreign bonds
64,377
101,758
94,783
74,887
0
335,805
370,679
Total Bonds
and other 
interest-bearing 
securities
102,386
122,272
126,068
110,325
282
461,333
512,378
Derivatives
7,595
10,203
9,671
12,628
1,760
41,857
21,082
Other assets
5,679
9,595
7,714
7,128
1,317
31,433
34,441
Total Assets
393,450
392,436
432,541
452,130
45,470
1,716,027
1,617,307
Liabilities
Derivatives
-763
-2,412
-384
-1,408
-39
-5,006
-5,694
Others
-50
-3,800
-9,183
-1,273
-274
-14,580
-15,270
Total Liabilities
-813
-6,212
-9,567
-2,681
-313
-19,586
-20,964
Total
392,637
386,224
422,974
449,449
45,157
1,696,441
1,596,342
Figure 8.2 Fund Assets
Note 12 Fund Assets
99

The data is taken from the annual report of each fund. The item of Other
assets include cash and bank balances, prepaid expenses and accrued
revenue etc. The item Other under Liabilities includes deferred income and
accrued charges.
See Note 5 and Note 6 and Appendix B for the values and formulas used in
calculating contribution revenue and turnover duration.
Table 8.18 Contribution Asset
millions of SEK
2019
2020
Contribution revenue
289,386
295,499
Turnover duration (years)
x 29.77413
x 30.09487
Contribution Asset
8,616,216
8,893,004
a. x denotes multiplication
a
Table 8.19 Pension Liability, 2020
millions of SEK
Active
Retired
Total
Inkomstpension
6,252,655
2,338,804
8,591,459
ATP
8,861
1,308,765
1,317,626
Indexation/balancing
-125,837
0
-125,837
Total
6,135,679
3,647,569
9,783,248
Table 8.20 Pension Liability, 2019
millions of SEK
Active
Retired
Total
Inkomstpension
6,094,659
2,152,255
8,246,914
ATP
12,774
1,405,028
1,417,802
Indexation/balancing
-210,488
0
-210,488
Total
5,896,945
3,557,283
9,454,228
Note 13 Contribution Asset
Note 14 Pension Liability
100

The pension liability to retirees for the ATP and the inkomstpension is
calculated in the same manner for both. A cohort’s liability is obtained from
the product of the cohort’s pension disbursements in December, a factor of
12 to get the annual amount, and the cohorts average economic lifespan.
The total liability to retirees is the sum of the cohorts’ pension liabilities.
Average economic life expectancy is expressed in the form of economic
annuity divisors.
Inkomstpension liability to persons who have not started to draw old-age
pension valued at the sum of all the insured’s pension reserves at the end of
the year end, without taking into account the upward revision of the income
index between year  and 
 (2020 and 2021). To the liability is also
added an estimate of the pension credit for inkomstpension earned during
the accounting year. The liability is also adjusted for the difference between
the previous year’s estimated and determined pension credit.
The ATP liability for individuals (born 1938–1953) who have not yet retired
is estimated as the annual pension they would have received if they had
retired in December 2020. In order to calculate the liability, the pension is
multiplied by the economic annuity divisor the expected remaining
disbursement period for each cohort. The ATP liability to the economically
active is gradually decreasing due to the phasing-out of the system, liability
amounting to almost SEK 9 billion in 2020 (SEK 13 billion in 2019).
The pension liability increased by just over 3 percent or by SEK 329 billion.
Many factors are involved in this increase some of the most important being
increased contributions and higher indexation.
Figure 8.3 Pension Liability, 2020
t
t + 1
101

Table 8.21 A Analysis of the Change in Inkomstpension Liability to the Economically Active
millions of SEK
2019
2020
Inkomstpension liability to the economically active, 
December 31, t-1
5,870,293
6,094,659
Of which estimated pension credit 
for inkomstpension earned in year t-1
-278,217
-289,386
Subtotal Pension balances as of December 31, t-1
5,592,076
5,805,273
Inheritance gains arising from persons 
dying at or before age 59
-6,885
-6,699
Adjustments affecting pension balances
-691
-172
Subtotal Opening pension balance in year t
5,584,500
5,798,402
Inheritance gains arising, persons dying at or after age 61
-5,748
-5,436
Changes in tax assessments etc. 
affecting pension balances
-3,110
-3,633
Confirmed inkomstpension credit earned in year t-1
277,960
287,823
Distributed inheritance gains from persons 
dying at or after age 61
8,851
7,947
Distributed inheritance gains from persons 
dying at or before age 59
6,846
6,651
Indexation
212,201
127,361
Deduction for administrative costs
-1,673
-1,818
Pensions drawn
-278,232
-263,791
Pensions revoked
3,678
3,650
Subtotal Pension balances as of December 31, t
5,805,273
5,957,156
Estimated inkomstpension credit earned in year t
289,386
295,499
Total Inkomstpension liability to the economically active
6,094,659
6,252,655
a. Distributed in year t.
b. Adjustments for deceased persons, sealed cases, etc.
c. See Note 7.
d. Arising year t-1.
a
b
c
d
Table 8.21 B Analysis of the Change in ATP Liability to the Economically Active
millions of SEK
2019
2020
ATP liability to the economically active, December 31, t-1
19,898
12,774
Effect of difference between assumption for year t 
and estimate in t-1 etc.
-81
-196
Opening ATP liability, year t
19,817
12,578
Indexation
584
313
Pensions drawn
-7,732
-4,055
Value of change in life expectancy
105
25
ATP liability to the economically active
12,774
8,861
102

The liability to pensioners changes with indexation and economic longevity,
and decreases with the payments made during the year. The pension may
change for reasons such as new earnings, change in marital status (for ATP
pensions), changes in valuation, etc. Such changes in the liability are
recorded as a change in the amount paid (change in amount). The liability to
retired persons also increases with new pensions granted. This increase in
the liability is matched by a decrease in the pension liability to active
persons.
At the time of retirement, a pension saver has the option of retaining her/his
accumulated balance in fund insurance; the amount of the pension will then
depend on the rate of return of the funds chosen by the saver. The other
option is to switch to traditional insurance with profit annuity, either on
retirement or later. With traditional insurance with profit annuity, the
pension is disbursed as a nominal guaranteed monthly amount. If the
management of the traditional insurance with profit annuity capital achieves
a return higher than the guaranteed rate, pension savers will receive a rebate
in the form of a monthly supplement, which may vary from year to year. In
2020, SEK 988 million was disbursed in supplementary amounts, as shown
in Note 23. In 2019 the supplementary amount was SEK 774 million.
Table 8.21 C Analysis of the Change in Pension Liability to Retirees, ATP and Inkomstpension, 2020
millions of SEK
Inkomstpension
ATP
Total
Pension liability to retirees, December 31 t-1
2,152,255
1,405,028
3,557,283
Additional liability to the economically active
260,141
4,055
264,196
Change in amounts disbursed
11,559
2,900
14,459
Pensions disbursed
-169,104
-157,153
-326,257
Indexation
77,523
49,887
127,410
Value of change in life expectancy
6,430
4,048
10,478
Total
2,338,804
1,308,765
3,647,569
a. Inkomstpension: Net of Pensions drawn and Pensions revoked, see Table 8.21 A. ATP: See Table 8.21 B.
b. See Note 2.
a
b
Table 8.22 Pension Disbursements Premium Pension
millions of SEK
2019
2020
Pension disbursements
Fund insurance
9,510
12,344
Traditional insurance
1,432
1,682
Total Pension disbursements
10,942
14,025
Transfers to European Communities
0
3
Total
10,942
14,028
Notes and Comments Regarding the Premium Pension
Note 15 Pension Disbursements
103

According to the Act (2002:125) on Transfer of Pension Credit to and from
the European Communities (EC), the value of pension credit for EC officials
can be transferred from the National Pension Funds and the premium
pension system to the service pension system of the EC. In 2020, transfers
of SEK 3 million were made from the premium pension.
The return earned includes realized and unrealized foreign-exchange gains
and losses after deduction of fund management costs and distributed rebates
of fund management fees.
The pension liability was changed by the return on the premium pension
funds, which totals SEK 94,379 (SEK 331,491 in 2019) million.
The item of Financial items, net, refers primarily to borrowing expenses,
gain/-loss on trade inventories (see Note 22) and interest revenue (net).
Table 8.23 Return on Funded Capital, 2020
millions of SEK
Fund Insurance
Traditional
insurance
Total 2020
Total 2019
Return
Stocks and shares
Direct return
22
62
84
85
Realized and unrealized 
capital gains
96,306
865
97,171
327,912
Total Stocks and shares
96,328
927
97,255
327,996
Bonds and other interest-bearing securities
Direct return (net interest)
0
-4
-4
-13
Realized and unrealized 
capital gains
727
1,379
2,106
2,198
Total Bonds and other 
interest-bearing securities
727
1,375
2,102
2,185
Net foreign-exchange gain/-loss
-4,978
0
-4,978
1,311
Total Return
92,077
2,302
94,379
331,491
Allocated Management Fees
4,622
21
4,643
4,741
Change, Traditional insurance
2,765
2,765
5,679
Total
96,699
2,323
101,787
341,911
Table 8.24 Costs of Administration
millions of SEK
2019
2020
Operating expenses
554
510
Financial items, net
43
-66
Total
597
444
Note 16 Return on Funded Capital
Note 17 Costs of Administration
104

Costs of fund management are paid directly from insurance assets and are
not included in the premium pension system’s operating expenses. Total
costs of administration in 2020 were SEK 444 million, of which
SEK 21.4 million refers to change in traditional insurance with profit
annuity. The corresponding amount for costs of administration in 2019 was
SEK 597 million, of which SEK 20.8 million refer to traditional insurance
with profit annuity. A presentation of the respective gross and net reported
costs is provided in the chapter Costs of Administration and Capital
Management.
In the operations of the premium pension system, the equivalent of
contribution revenue is new pension credit including interest for the period
during which the contribution moneys are managed before being invested in
the funds chosen by the insured. During the year, changes in pension credit
have come from previous income years. Total new pension credit for the
premium pension in 2020 was SEK 45,727 million; in 2019 it was
SEK 45,140 million.
Inheritance gains arising and distributed are analogous to decedents’ capital.
Inheritance gains are distributed once a year; in addition, a minor portion is
distributed during the course of the year in connection with changeovers
from fund insurance to traditional insurance with profit annuity. In 2020
inheritance gains distributed were SEK 4,135 million; this amount was
determined by the sum of the capital released by deaths in calendar year
Table 8.25 New Pension Credit
millions of SEK
2019
2020
Preliminary contribution revenue, including interest 
on the premium pension earned in 2017/2018
47,440
48,670
Adjustment amount, confirmed pension credit
Confirmed pension credit, including interest, for 
the premium pension earned 
in 2018/19 and 2019/20
42,986
44,487
Preliminary contribution for the premium pension 
earned in 2018/19 and 2019/20
-45,298
-47,440
Total Adjustment amount, confirmed pension credit
-2,312
-2,953
Change in pension credit
12
10
Total
45,140
45,727
Table 8.26 Inheritance Gains, Arising and Distributed
millions of SEK
2019
2020
Inheritance gains arising
3,700
4,135
Inheritance gains distributed
3,700
4,135
Note 18 New Pension Credit
Note 19 Inheritance Gains Arising and Distributed
105

2019. The corresponding amount distributed in 2019 was
SEK 3,700 million. This item includes reductions in premium pension credit
when premium pensions are transferred between spouses.
The amount of SEK 508 million is for the fees deducted by the Swedish
Pensions Agency to finance the costs of administration for the premium
pension system in 2020. The average fee for 2020 was equivalent to
0.04 percent of pension savers’ account balances with a ceiling of SEK 100.
In 2020, insurance assets in fund insurance amounted to
SEK 1,583,021 million, of which SEK 4,352 million was attributable to
current trading and mortality capital. Temporary management of preliminary
contributions refers to income year 2020. As of December 31, 2020, there
were 6,168,986 premium pension savers, all of them in fund insurance, and
1,723,114 pensioners, of whom 1,381,612 were in fund insurance and
341,502 in traditional insurance with profit annuity.
Table 8.27 Costs of Administration
millions of SEK
2019
2020
Deduction for costs of administration
474
508
Table 8.28 Insurance Assets, 2020
millions of SEK
Fund insurance
Traditional
insurance
Temporary
management
Total 2020
Total 2019
Stocks and shares
1,484,062
18,713
1,502,775
1,388,529
Bonds and other 
interest-bearing 
securities
94,607
34,335
41,568
170,510
156,731
Trade in progress and 
inheritance gains arising
4,352
332
4,684
3,788
Total
1,583,021
53,380
41,568
1,677,969
1,549,049
Table 8.29 Other assets
millions of SEK
2019
2020
The Swedish Pensions Agency’s administrative 
inventory of fund shares (trading inventory)
87
132
Other assets
7,261
10,961
Total
7,348
11,093
Note 20 Deduction for Costs of Administration
Note 21 Insurance Assets
Note 22 Other Assets
106

The Swedish Pensions Agency’s administrative inventory of fund shares
facilitates trade in fund shares by reducing the number of trading
transactions with fund managers.
The item of Other assets consist of cash and bank balances, fund trading in
progress, other receivables and accrued interest revenue.
At the beginning of the year, the Swedish Pensions Agency reported
negative equity for unit-linked insurance operations. The solvency rules of
the Insurance Business Act do not apply to the Swedish Pensions Agency,
but the deficit is financed by credit at the National Debt-Office. In 2020 a
balance between assets and liabilities was reached. Traditional insurance
with profit annuity reports a positive result that will be added to the
consolidation fund as owner equity. The amounts in the consolidation fund
are distributed to pensioners as refunds in connection with pension
disbursements.
The pension liability is a liability to pension savers and to pensioners.
Pension liability in fund insurance is linked primarily to fund shares and is
affected by the development of the market value of the funds chosen.
Pension liability in traditional insurance with profit annuity is calculated for
each insurance as the capital value of remaining guaranteed disbursements.
The value is calculated on assumptions about future return, life expectancy
and operating expenses. The value of the asset is shown in Note 21.
Table 8.30 Change in Owner Equity, 2020
millions of SEK
Fund insurance
Traditional
insurance
Total 2020
Total 2019
Opening owner equity: 
Consolidation fund
-121
16,883
16,762
11,982
Rebate paid from 
consolidation fund
-988
-988
-774
Net income for the period
65
2,765
2,830
5,554
Total owner equity
-56
18,660
18,604
16,762
Table 8.31 Pension Liability
millions of SEK
2019
2020
Fund insurance
1,461,885
1,583,251
Traditional insurance
29,602
34,780
Liabilities in regard to preliminary contributions
40,674
41,568
Total
1,532,161
1,659,599
Note 23 Change in Owner Equity
Note 24 Pension Liability
107

Information on how the economic annuity divisors for fund insurance and
traditional insurance with profit annuity are calculated is found in Appendix
A Calculation Factors.
Liabilities in regard to preliminary contributions correspond to the assets
invested under temporary management; the value of these assets can be
found in Note 21.
The pension liability is changed by new pension credit earned, preliminary
contributions, changes in the extent of pension withdrawal, changes in
pension credit due to changes in taxation, changes in value of assets, costs
of administration, pension disbursements and estimates of future mortality
for the insured.
Table 8.32 Pension Liability, 2020
millions of SEK
Fund insurance
Traditional
insurance
Liabilities in
regard to
preliminary
contributions
Premium pension capital, December 31, 2020
Pension liability, December 31, 2019
1,461,885
29,602
40,674
Change in value
92,076
2,301
Confirmed premium pension credit 
earned in 2019
44,098
389
-44,487
Preliminary contributions, premium 
pension, earned in 2020
48,670
Management fees allocated, etc.
4,622
21
Inheritance gains arising
3,806
328
Settlement, preliminary contributions, 
previous years
-44
Change in pension credit for 
the premium pension
10
0
Decrease in liability because of 
pensions drawn in 2020
-12,344
-1,682
Switch to Traditional insurance 
from fund insurance
-6,926
6,926
Inheritance gains distributed
-3,806
-328
Deduction for costs of administration
-508
Change in pension liability
-2,765
Other
338
-13
-3,245
Total Premium pension capital, 
December 31, 2020
1,583,251
34,779
41,568
Adjustment affecting 
premium pension capital
Total
1,583,251
34,779
41,568
a. Inheritance gains, capital released in 2019, to be allocated in 2020.
a
108

Other liabilities consist chiefly of fund trading in progress, borrowings from
the National Debt Office, accrued management fees and accrued interest
fees.
The accounting for the premium pension’s share of the Swedish Pensions
Agency’s assets, liabilities and results has been simplified so that a net
amount is reported. It is included so that the balance sheet will balance.
Table 8.33 Other Liabilities
millions of SEK
2019
2020
Other liabilities
7,469
10,854
Share of consolidated Swedish Pensions Agency 
assets, liabilities and result, net
5
5
Total
7,474
10,859
Note 25 Other Liabilities
109

A. Appendix Calculation Factors
The change in the income index shows the development of the average
income. Here, income refers to pension-qualifying income without
limitation by the ceiling, but after deduction of the individual pension
contribution.


As of 2017, the income index is calculated according to new rules (SFS
2015: 676). The income index for year  will measure the change in average
income between the years 
 and 
. Pension qualifying income is
first known after taxation, that is, in December of the year following the
income year. This means the income of the two most recent years is based
on estimates. The income data used in the denominator is the same income
data used for previous years. For 2018, the income index was calculated in a
special way 
. Income index for year  is thus corrected
by the outcome for the year 
. In the denominator for this calculation
year, the outcome of average pension-qualifying income is used.
The Social Insurance Code 58 Ch. 10 § (SFB) (2010:110) requires that the income
index be calculated for each year. By Government decision, the Swedish Pensions
Agency is to calculate and prepare proposals for an income index, which the
Government then confirms. In addition, the Agency is required by the Regulations for
the Earnings Related Old Age Pension (1998:1340) to calculate and confirm factors
for inheritance gains, administrative costs and annuity divisors.
According to 64 Ch. 3 § SFB, premium pension operations are to be conducted
according to sound insurance principles. These principles, as interpreted by the
Swedish Pensions Agency, govern the calculation of the bonus rate, inheritance gains
and annuity divisors for the premium pension. Further, the Swedish Pensions Agency
is to calculate the fee that will finance premium pension operations.
(A.1.1)
I
​ =
t
I
​ ⋅
t−1​
u​t−2
u​t−1
(A.1.2)
u
​ =
t​
N​t
Y​t
calendar year
income index year 
average pension-qualifying income in year . The denominator uses
the same income data previously used to calculate the income index
for the previous year and is therefore an estimate.
total pension-qualifying income without limitation by the ceiling,
person aged 16–64 in year , after deduction of the individual
pension contribution.
number of persons aged 16–64 with pension-qualifying income in
year 
t
I​t
t
u​t
t
Y​t
t
N​t
t
t
t −2
t −1
I
​ =
t
I
​ ⋅
t−2 u
​/u
​
t−1
t−3
t
t −3
Income Index
110

When balancing is activated, the balance index is used instead of the income
index.


At the turn of the year 
, indexation takes place via multiplication
of pensions by the ratio between the balance index for year  and the income
index for year 
 divided by 1.016, and of pension balances by the ratio
between the balance index for year  and the income index for year 
. At
the end of year , there is analogous indexation of the ratio between the
balance index for year 
 and the balance index for year . Indexation by
the balance index ceases when the balance index reaches the level of the
income index.
(A.2.1)
B
​ =
t
I
​ ⋅
t
BT
​
t
∗
(A.2.2)
B
​ =
t+1
B
​ ⋅
t
(
​) ⋅
I
​t
I
​
t+1
BT
​ =
t+1
∗
I
​ ⋅
t+1 BT
​ ⋅
t
∗
BT
​
t+1
∗
balance index year 
income index year 
damped balance ratio year 
B
​t
t
I
​t
t
BT
​
t
∗
t1
(t −1) →t
t
t −1
t
t −1
t
t + 1
t
The point between the vertical lines is the median value. The starting point for the upper vertical line is the 75th
percentile; the ending point is the maximum value. The starting point for the lower vertical line is the 25th
percentile; the ending point is the minimum value.
Figure A.1 Indexation
Balance Index
111

In the premium pension system the amount to pay out is recalculated each
year based on the value of the premium pension account. For those with
fund insurance the yield from the account will depend on the fund returns,
while for those with traditional insurance with profit annuity the value of the
account will depend on the rate of return. The guaranteed amount in
traditional insurance remains unchanged during the payout period, but it is
increased if new premiums are received. The rate of return does not affect
the amount of the life-insurance provisions since the pension liability is
calculated on the basis of expected future payments of guaranteed amounts.
The pension balances of deceased persons are credited to the survivors in
the same age group in the form of inheritance gains. For the economically
active, this is done through multiplying the pension balances of the
survivors by an annually calculated inheritance gain factor for the
inkomstpension.

The point between the vertical lines is the median value. The starting point for the upper vertical line is the 75th
percentile; the ending point is the maximum value. The starting point for the lower vertical line is the 25th
percentile; the ending point is the minimum value.
Figure A.2 Rate of Rebate and Guarantee
(A.4.1)
AF
​ =
i,t
​
​
​
⎩
⎪
⎪
⎪
⎪
⎪
⎪
⎨
⎪
⎪
⎪
⎪
⎪
⎧
1 +
,
​PB
​
j=2
∑
17
j−1,t−1
​PBd
​
j=2
∑
17
j−1,t−1
1 +
,
PB
​
i−1,t−1
PBd
​
i−1,t−1
​,
L
​+L
​
i,t
i+1,t
L
​+L
​
i−1,t
i,t
i = 2, 3, ..., 17
i = 18, 19, ..., 60
i = 60, 61, ...
age at end of year 
i
t
Rate of return
Inheritance Gain Factors for the Inkomstpension
112

For persons 60 years of age or less, the inheritance gain factor is calculated
as the sum of the pension balances of the deceased divided by the sum of the
pension balances for the survivors in the same age group. For the group
aged 2–17 years, a common inheritance gain factor is calculated. As there is
some delay in information on persons dying during the year, the distribution
of inheritance gains to persons aged 60 or less is made with a time lag of
one year. For older persons, inheritance gain factors are calculated on the
basis of the life-expectancy statistics from Statistics Sweden.
Inheritance gains arising after retirement are implicitly taken into account in
the annuity divisor, through redistribution from individuals who die earlier
to those who live longer. For the purpose of distributing inheritance gains by
the same principle for both the economically active and retirees in the same
birth cohort, the method of allocation is changed from age 60 on. By
switching methods when the individual turns 60, the backlog in the
distribution of inheritance gains before pension withdrawal. In the year
when an insured turns 60, he or she is credited with double inheritance gains
because of the two different procedures. In 2021, the change of method will
take place at age 61 instead of 60 because the minimum withdrawal age has
been raised to 62. Subject to a transitional provision, the age limit will be 60
in 2020.
inheritance gain factor  for age group 
pension balances of persons dying in year  in age group 
total pension balances of survivors in year  in age group 
number of survivors in year  in age group  out of 100,000 born,
according to the life span data of Statistics Sweden for the five-year
period immediately preceding the year when the insured reaches age
60 for = 60–64 and age 64 for = 65 or older.
AF
​
i,t
t
i
P Bd
​
i,t
t
i
P B
​
i,t
t
i
L
​
i,t
t
i
i
i
113

The impact of inheritance gains on the pension liability is limited, for the
pension balances of deceased persons are redistributed to the survivors.
There is, however, an effect on the inkomstpension liability to the
economically active because of the difference between inheritance gains
arising and inheritance gains distributed; this effect is shown in Note 10,
Chapter 8. For the group dying before their 60th year, the difference is
explained by tax assessment changes between the time when inheritance
gain factors are calculated and the time when the gains are distributed, and
by late information on persons dying. For the group dying in their 60th year
or thereafter, the reasons are differences between estimated and actual
mortality, and possible variations in mortality depending on the insured’s
level of income, i.e. the effect due to the shorter average life spans, for each
gender, of persons with low incomes compared to persons with high
incomes.
In the premium pension system, inheritance gains are calculated as a
percentage of the premium pension capital of the survivors. The percentage
corresponds to the one-year risk of death, i.e. the probability of dying within
one year. Inheritance gains are distributed once a year for both the
economically active and retirees. As with the inkomstpension, future
expected inheritance gains are included in the annuity divisor. If the insured
elects a survivor benefit, the inheritance gain will be much smaller, as it is
then based on the probability that the longer-surviving party, whether the
primary insured or the co-insured, will die within one year of the first party.
The risk of death in year  is calculated by Makeham’s formula (see Annuity
Divisors for the premium pension). The values of ,  and  in the formula
The inheritance gain factor for the inkomstpension for 60-year-olds is shown in the diagram as the two inheritance
gain factors multiplied by each other. In the actual distribution of inheritance gains, however, the two different
inheritance gains factors are applied to different bases.
Figure A.3 Inheritance Gains
t
a b
c
Inheritance Gain Factors for the Premium Pension
114

are determined by the relationship between the capital of pension savers
dying in year 
and the capital of the surviving pension savers in the
same year, calculated for each age group. The pension capital used to
determine the inheritance gain in year  corresponds to the average balance
of the premium pension account as of the last day of every month of year 
. The amounts of the inheritance gains are adjusted by a factor (close to
1) that will equalize with the greatest possible accuracy the total amount
distributed in year  and the capital of pension savers dying in year 
.
The inheritance gains for the premium pension fund insurance do not affect
the pension liability over time, as death capital is offset by inheritance gains
distributed.
The costs of administering the inkomstpension system reduce the pension
balances of the economically active. The deduction from pension balances is
recalculated annually through multiplication of pension balances by an
administrative-cost factor.

The administrative-cost factor is calculated on the basis of a certain
proportion, , of budgeted costs for year . Until the year 2021, the
proportion charged to pension balances will be less than 100 percent (see
Note 11). Moreover, there is an adjustment for the administrative costs of
year 
. The adjustment amount is equal to the difference between the
amount that would have been deducted from pension balances, based on
actual cost and the adjustment amount for the previous year, and the actual
deduction made from pension balances in the same year.
The administrative-cost factor affects the inkomstpension liability to the
economically active via the deduction from pension balances (see Note 14,
t −1
t
t −1
t
t −1
Table A.1 Values in determination of inheritance gain for 2019, distributed during 2020
a
b
c
factor
Fund insurance
0.00013
0.0000053
0.1091
0.9938
Traditional insurance
0.00070
0.0000027
0.1188
0.9905
(A.6.1)
FF
​ =
t
1 −(
​)
PB
​
t−1
B
​ ⋅A
​ + J
​
t
t
t−1
administrative cost factor, year 
budgeted costs of administration, year 
proportion charged to pension balances, year 
adjustment amount, equals the difference between the amount that
would have been deducted from pension balances in year , based on
actual cost in year  and the adjustment amount in year 
, as well
as the actual deduction taken from pension balances in year 
total pension balances, year 
F F
​t
t
B
​t
t
A
​t
t
J
​t
t
t
t −1
t
P B
​t
t
A
t
t −1
Administrative Cost Factor, Inkomstpension
115

Table 8.21 A in Chapter 8). The difference between total costs of
administration (see Note 4 in chapter 8) and the deduction from pension
balances puts a strain on the balance ratio.
In the premium pension a charge is deducted from pension savers’ premium
pension accounts once a year. The charge is to cover the total operating
costs of the premium pension, including interest and other financial
expenses.
Administrative costs affect the capital of the premium pension system and at
the same time, through the deduction from pension balances, they affect the
premium pension liability by the same amount (see Note 17 and note 20) for
fund insurance. For traditional insurance with profit annuity, life-insurance
provisions are affected by assumptions of future expected operating costs.
The annuity divisors for the inkomstpension are used for recalculation of
pension balances as annual disbursements and are a measure of life
expectancy at retirement, with consideration given to the interest of
1.6 percent (advance interest) credited to pensions in advance.

For persons who have begun drawing their old-age pensions before age 65,
the amount disbursed is recalculated, because of the recalculated annuity
divisors, at the outset of the year when the individual turns 65. The reason
for the recalculation is the change in the underlying statistical data for the
latest life expectancy statistics available in the individual’s 65th year. With
the continuing increase in life expectancy, the recalculated annuity divisors
have so far been higher than before, resulting in reduction of future monthly
pensions. The consequent marginal decrease in the inkomstpension liability
to retirees is a component of the Change in Amounts Disbursed in Note 14,
Table 8.21 C in Chapter 8.
After age 65, there is no further recalculation of annuity divisors. The
increase in the pension liability of the system resulting from the fixed
(A.8.1)
D
​ =
i
​
​
​(L
​ +
12L
​i
1
k=i
∑
r
X=0
∑
11
k
(L
​ −
k+1
L
​)
​)(1.016)
(1.016)
,
i =
k 12
X
−(k−i)
​
12
−X
62, 63, ..., r
annuity divisor for age group 
number of years of retirement (
, 
, 
, etc.)
number of months (0,1,…,11)
number of survivors in age group  per 100,000 born, according to
the life span statistics of Statistics Sweden. These statistics are for the
five-year period immediately preceding the year when the insured
reached age 61 in the case of pension withdrawal before age 65, and
age 64 in the case of withdrawal thereafter
D
​i
i
k −i
k = i i + 1 i + 2
X
L
​i
i
Charge for Costs of Administration, Premium Pension
Annuity Divisors for the Inkomstpension
116

annuity divisors puts strain on the balance ratio when life expectancy is
increasing.
Drawing an old-age pension involves a transfer of pension liability from the
economically active to retirees. The actual recalculation of pension balances
as annual disbursements results in a marginal change in the pension liability.
The change arises because of the difference between annuity divisors and
what we refer to as “economic annuity divisors” in this report. For a
description of economic annuity divisors, see Appendix B Mathematical
Description of the Balance Ratio, Pension Liability. The economic annuity
divisors are used to calculate the pension liability to retirees.
Annuity divisors are determined for each age with no upper age limit.
To calculate the annual premium pension, the value of the premium pension
account is divided by an annuity divisor for the premium pension. Unlike
the inkomstpension, the annuity divisor for the premium pension is based on
forecasts of life expectancy.


Table A.2 Confirmed Annuity Divisors for the Inkomstpension
61
62
63
64
65
66
67
68
69
70
1938
17.87
17.29
16.71
16.13
15.56
14.99
14.42
13.84
13.27
12.71
1939
17.94
17.36
16.78
16.19
15.62
15.04
14.47
13.89
13.32
12.76
1940
18.02
17.44
16.86
16.27
15.69
15.11
14.54
13.96
13.39
12.82
1941
18.14
17.56
16.98
16.39
15.81
15.23
14.65
14.08
13.50
12.94
1942
18.23
17.65
17.06
16.48
15.89
15.31
14.74
14.16
13.59
13.02
1943
18.33
17.75
17.16
16.58
15.99
15.41
14.84
14.26
13.68
13.11
1944
18.44
17.86
17.28
16.70
16.11
15.54
14.96
14.38
13.80
13.23
1945
18.55
17.96
17.38
16.80
16.22
15.64
15.07
14.48
13.91
13.33
1946
18.64
18.05
17.47
16.89
16.31
15.73
15.16
14.57
13.99
13.41
1947
18.73
18.15
17.56
16.98
16.40
15.83
15.24
14.66
14.07
13.49
1948
18.83
18.24
17.66
17.07
16.49
15.91
15.33
14.74
14.16
13.58
1949
18.89
18.31
17.72
17.13
16.55
15.97
15.38
14.79
14.21
13.63
1950
18.98
18.39
17.80
17.21
16.63
16.05
15.46
14.87
14.28
13.70
1951
19.06
18.48
17.89
17.30
16.71
16.13
15.54
14.95
14.37
13.78
1952
19.14
18.55
17.96
17.37
16.78
16.20
15.61
15.02
14.43
13.85
1953
19.20
18.62
18.03
17.44
16.85
16.26
15.68
15.09
14.50
13.91
1954
19.28
18.69
18.11
17.52
16.93
16.34
15.76
15.17
14.58
13.99
1955
19.34
18.75
18.16
17.58
16.99
16.40
15.81
15.22
14.63
14.04
1956
19.42
18.84
18.25
17.66
17.07
16.48
15.89
15.30
14.71
14.12
a. Annuity divisors are confirmed each year for all ages, but the table shows only the divisors up to age 70.
a
(A.9.1)
D
​ =
x
​e
​dt
0
∫
∞
−δt
l(x)
l(x + t)
(A.9.2)
δ = ln(1 + r) −ϵ
Annuity Divisors for the Premium Pension
117

The annuity divisors are calculated in continuous time and according to
exact age at retirement, but in principle they are consistent with the formula
for the annuity divisor for the inkomstpension.  The survival function, 
,
can be considered equivalent to the number  used in the calculation of the
inkomstpension. The mortality function, 
, is the so-called Makeham’s
formula used for calculating the risk of death within one year. The values of
a, b and c correspond to Statistics Sweden’s forecast of remaining life
expectancy in the years 2015–2110 for individuals born in 1938, 1945 or
1955.
So-called cohort mortality is used, which means that the year cohort 1938 is
used for individuals born in the 1930s or earlier, year cohort 1945 is used for
individuals born in the 1940s, and year cohort 1955 is used for individuals
born in the 1950s or later. For x> 100 
 merges with a straight line with
a slope of 0.01. During 2016, a charge  was imposed on mortality intensity
following an analysis of how premium pension mortality differed from that
found in Statistics Sweden.
When calculating the guaranteed amount in traditional insurance with profit
annuity, the Statistics Sweden alternative with low mortality is used,
reduced by a further 10 percent.
In the calculation of the payment amount, the interest rate assumption is
called advance interest rate. The interest intensity  is based on the interest
rate of 1.75 percent for both fund insurance and traditional insurance,
reduced by the interest intensity for operating expenses of 0.1 percent,
which corresponds to = 0.016349.
When calculating the annuity divisor to produce the guaranteed amount in
the traditional insurance, we use Statistics Sweden’s alternative with low 
(A.9.3)
l(x) = e
−
​(1−s)μ(t)dt
0
∫
x
(A.9.4)
μ(x) =
​
​
{ a + becx
μ(100) + (x −100) ⋅0.01
when x ≤100
when x > 100
annuity divisors
exact age at time of calculation
interest rate
interest intensity of operating costs
mortality charge
D
​x
x
r
ϵ
s
2
l(x)
L
μ(x)
μ(x)
s
Table A.3 Current Values for Disbursement Amounts in Fund Insurance and Traditional Insurance
Cohort
a
b
c
s
1930s
0.00005
0.00000198
0.1239
0.1
1940s
0.00460
0.00000053
0.1373
0.1
1950s
0.00470
0.00000019
0.1476
0.1
δ
δ
118

mortality reduced by a further 10 percent, an interest rate which is
-1.0 percent and an interest intensity for operating expenses of 0.1 percent.
In traditional insurance, the technical insurance provision, FTA (“pension
liability“), consists of life insurance provision, unpaid claims and other
technical insurance provisions. The life insurance provision is determined
for each insurance as the capital value of remaining guaranteed payments.
The value is calculated using assumptions about the discount rate, mortality
and operating costs. As of May 1, 2017, when a new law regulating the
Swedish Pensions Agency’s premium pension operation came into effect,
the discount rate is given by an interest rate curve that is the average of the
interest rate curve for government bonds and mortgage bonds. The mortality
assumption is different for men and women, but otherwise calculated as for
amounts to be paid out, cohort-based and using Statistics Sweden’s forecast
with a deduction of 10 percent. Operating expenses are assumed to be
0.07 percent of the capital.
Unpaid claims are pension disbursements that have not been able to be
carried out. Remaining technical provisions consist of reductions from the
transfer of pension credit between spouses not yet distributed. These two
items are very small compared to the life insurance provision.
Table A.4 Annuity Divisors for Annual Amount, Fund and Traditional Insurance
61
62
63
64
65
Without survivor benefit
20.91
20.37
19.82
19.26
18.69
With survivor benefit
Co-insured 55
26.30
26.12
25.95
25.80
25.65
Co-insured 60
24.69
24.44
24.19
23.96
23.75
Co-insured 65
23.39
23.05
22.72
22.40
22.10
Co-insured 70
22.31
21.88
21.45
21.04
20.63
66
67
68
69
70
Without survivor benefit
18.12
17.54
16.29
15.71
15.13
With survivor benefit
Co-insured 55
25.51
25.38
25.17
25.06
24.97
Co-insured 60
23.55
23.36
23.04
22.89
22.75
Co-insured 65
21.81
21.53
21.06
20.83
20.63
Co-insured 70
20.23
19.84
19.12
18.79
18.47
119

In chapter 6 Changes in the Value of the Pension System, two different
measures are used for calculating the change in value in the premium
pension system. These measures are time-weighted return and capital-
weighted return. They are briefly described below.
The capital-weighted rate of return takes into consideration the capital flow
of the account by weighing together the return and the capital in the account
during the corresponding period. This means that during periods when the
sum under capital management has been large, the return is given greater
weight in the calculation than the return during periods when there has been
little capital managed. The cash flows chiefly included in the calculations
consist of paid-in pension credit and pension disbursements. The interest on
the preliminary pension credit, the return on the funds in the portfolio, the
administration fee to the Swedish Pensions Agency, the management fee to
fund companies, the bonus on the management fee and inheritance gains are
not included in the cash flows, but affect the return directly.
When the capital-weighted return is calculated, the so-called internal rate of
return is sought. This rate is a discount rate at which the present value of all
cash flows, including the value of the closing balance but with the opposite
sign, will equal zero.
The capital-weighted return (also referred to as the Internal Rate of Return,
or IRR) is calculated by solving the equation

Table A.5 Annuity Divisors for Guaranteed Annual Amount (Traditional insurance)
61
62
63
64
65
Without survivor benefit
32.49
31.38
30.27
29.17
28.09
With survivor benefit
Co-insured 55
44.62
44.18
43.76
43.38
43.02
Co-insured 60
40.58
39.97
39.40
38.88
38.39
Co-insured 65
37.57
36.78
36.04
35.34
34.68
Co-insured 70
35.52
34.59
33.70
32.84
32.01
66
67
68
69
70
Without survivor benefit
27.01
25.94
24.89
23.84
22.81
With survivor benefit
Co-insured 55
42.70
42.40
42.12
41.87
41.63
Co-insured 60
37.94
37.53
37.15
36.80
36.48
Co-insured 65
34.06
33.49
32.95
32.46
32.01
Co-insured 70
31.22
30.47
29.77
29.10
28.48
(A.10.1)
​
​ =
t=0
∑
T
(1 + r)
​
365
t
C
​t
0
internal rate of return during the period, expressed as an annual rate
r
Change in Value, Premium Pension
Capital-Weighted Rate of Return
120

The equation requires that the final value be negative so that a value of SEK
 results in a transaction of SEK 
. 
 is thus always  0.
To calculate the internal rate of return, it is therefore necessary to know the
closing value of the portfolio (market value), all cash flows to and from the
portfolio, and the time when these cash flows take place. The internal rate of
return can be said to yield the “interest rate on bank accounts” which, given
the deposits and withdrawals, have resulted in the current closing value.
The formula above for the internal rate of return is the one normally used in
financial matters.
It can also be expressed in the following way, which is consistent with how
interest is actually credited to bank accounts:

Interest is earned on each deposit 
 from the time of deposit  until the
closing date .
 is greater than or equal to zero, and is the balance at the time of
calculation.
With the time-weighted return, adjustment is made for the effects of capital
inflows and outflows, that is, to prevent new pension credit recorded or
pensions paid from affecting the calculated rate of return. The time-
weighted return thus measures the return for a certain deposited amount for
a certain period of time. If time-weighted, the return is measured for a
period, the returns for the partial periods are weighed together with equal
weights. A partial period consists of the time between two cash flows. The
equation below describes the time-weighted return.

number of days since the starting point
closing point
transaction (cash flow) at time 
final value, that is, the value of the account as of the day when the
valuation is made
t
T
C
​t
t
C
​
T
X
−X C
​
T
≤
(A.10.2)
​C
​ ⋅
t=0
∑
T−1
t (1 + r)
=
​
365
T−t
C
​
T
C
​t
t
T
C
​
T
(A.10.3)
R
​ =
t
(
​
​) −
t=0
∏
T
MV
​ + C
​
t
t
MV
​
t+1
1
return during the period
number of days since the starting point
closing point
market value at time 
transaction (cash flow) at time 
R
​t
t
T
M V
​t
t
C
​t
t
Time-weighted return
121

The time-weighted return can be used to obtain accurate comparisons of the
return between funds, where fund managers cannot set aside more capital
under favourable return conditions or vice versa. The measure can also be
used for comparisons with relevant market indices or with the return
achieved by other managers. In the premium pension system, the pension
saver cannot freely determine the in- or outflow of capital for the premium
pension account. On the other hand, the saver decides whether and when the
moneys invested are to be transferred to another fund. The fund companies
have no influence over the flow of capital in the fund.
Tabell A.6 Measures of the development of value for the system
How well are the funds doing?
– Time Weighted Return (Premium Pension Index)
How well are the pension savers doing?
– Capital-Weighted Return
Tabell A.7 Measures of the development of value for fund savers
How well are my funds doing?
– Time Weighted Return per Fund
– Time-Weighted Return for the Fund Portfolio
How well is my account/my pension doing?
– Capital-Weighted Return
122

Footnotes
1. For balance index 2016 and earlier the balance ratio was used (SFS:2015:676).
2. The formula applies in cases where one life is insured, i.e. where there is no
survivor coverage.
123

B. Appendix Mathematical Description of the
Balance Ratio
In accordance with Ch. 58 § 14 of the Social Insurance Code (SFB,
2010:110), a balance ratio is to be calculated annually. The regulations
(2002:780) require the Swedish Pensions Agency to prepare a calculation of
the balance ratio, to be confirmed subsequently by the Government.
The balance ratio is calculated as follows:


The damped balance ratio for a year is equal to 1 plus one-third of the
difference between the balance ratio fixed for that year and the number 1.
The damped balance ratio is rounded to four decimal places.


(B.1.1)
BT
​ =
t​
S​t−2
AT
​ + BF​
t−2
t−2
(B.1.2)
AT
​ =
t
A
​ ⋅
t OT​t−1
calender year if the variable refers to flows, end of calender year if
the variable refers to stocks
contribution asset, year 
buffer fund, the aggregate market value of the assets of the First–
Fourth and Sixth National Pension Funds in year . By market value is
meant the value which according to Ch. 6 § 3 of the National Pension
Funds Act (2000:192) and Ch. 4 § 2 Sixth National Pension Fund Act
(2000:193), is to be shown in the annual reports of these funds
pension liability, year 
contribution revenue of the pay-as-you-go system, year 
turnover duration, year 
t
AT​t
t
BF​t
t
S​t
t
A​t
t
OT​t
t
(B.2.1)
BT
=
∗
​ +
3
BT−1
1
(B.3.1)
OT
​ =
t
U
​ −
A˚t
I​A˚t
Excerpt from Regulation (2002:780) on the Calculation of the
Balance Ratio1
Balance Ratio, BT
Damped Balance Ratio, BT ∗
Turnover Duration, OT
124

The proportion of pension liability relating to pensioners 
 indicates how
large a share of pension liability in age group  concerns pensioners and is
included in the calculation of the payment age 
.

(B.4.1)
I
​ =
A˚t
​
​
​ ⋅L
​
i=16
∑
R
​
intj,t
PRi,t
i,t
​
​ ⋅L
​ ⋅(i + 0.5)
i=16
∑
R
​
intj,t
PRi,t
i,t
(B.4.2)
​ =
PRi,t
​,
i =
2
​ +
​
N
​
i,t
PR
​
i,t
N
​
i+1,t
PR
​
i+1,t
16, 17, ..., R
​ −
intj,t
1
(B.4.3)
​ =
PRR
​
intj,t
​
N
​
R
​
intj,t
PR
​
R
​
intj,t
(B.4.4)
L
​ =
i,t
L
​ ⋅
i−1,t
h
​,
i =
i,t
17, 18, ..., R
​ d r L
​ =
intj,t
a¨
16,t
1
(B.4.5)
h
​ =
i,t
​,
i =
N
​
i−1,t−1
N
​
i,t
17, 18, ..., R
​
intj,t
age at year-end
the highest age group to have earned pension credit for year 
the sum of 16 percent of pension qualifying-income calculated
according to Ch. 59 of the Social Insurance Code and 16 percent of
the pension-qualifying amounts calculated according to Ch. 60 of said
code, income year , age group 
number of individuals in age group  who at any time through income
year  have been credited with pension-qualifying income or pension-
qualifying amounts and have not been registered as deceased
proportion of persons in age group  year 
change in proportion of persons in age group  year 
i
R
​
intj,t
t
P R
​
i,t
t
i
N
​
i,t
i
t
L
​
i,t
i
t
h
​
i,t
i
t
R
​i
∗
i
UA˚
(B.5.1)
R
​ =
i
∗
​
SP
​ + PB
​
i,t
i,t
∗
SP
​
i,t
pension liability in year  for age group  concerning pensioners in the
distribution system in respect to pensions paid
the sum of pension balances without regard to change in the income
index between year  and 
SP
​
i,t
t
i
P B
​
i,t
∗
t
t + 1
Income Age, IA˚
The proportion of pension liability relating to pensioners, R
​i
∗
125

(B.6.1)
U
​ =
A˚t
​
​1.016
⋅L
​ ⋅R
​
i=61
∑
R
​
utb,t
−(i−61+0.5)
i,t
∗
i
∗
​1.016
⋅L
​ ⋅(i + 0.5) ⋅R
​
i=61
∑
R
​
utb,t
−(i−61+0.5)
i,t
∗
i
∗
(B.6.2)
L
​ =
i,t
∗
L
​ ⋅
i−1,t
∗
he
​
 where L
​ =
i,t
60,t
∗
1
(B.6.3)
he
​ =
i,t
​,
i =
U
​ + Ud
​ + 2 ⋅Ud
​
i,t
i,t
i,t
∗
U
​
i,t
61, 62, ..., R
​
utb,t
oldest age group receiving a pension, year 
proportion of remaining disbursements to age group  year 
the proportion of pension liability in age group  concerning
pensioners
change in pension disbursements due to deaths, year , age group 
total pension disbursements in December of year  to age group 
total of last monthly pension disbursements to persons in age group 
who received pensions in December of year 
, but not in
December of year 
total of last monthly pension disbursements to persons in age group 
who were granted pensions in year  but did not receive a pension
payment in December of year  
R
​
utb,t
t
L
​
i,t
∗
i
t
R
​i
∗
i
he
​
i,t
t
i2
U
​
i,t
t
i
U d
​
i,t
i
t −1
t3
U d
​
i,t
∗
i
t
t 4
Payment Age, UA˚
126

(B.7.1)
S
​ =
t
SA
​ +
t
SP
​t
(B.7.2)
SA
​ =
t
PB
​ +
t
∗
IPR
​ +
t
TP
​t
(B.7.3)
PB =
∗
​
​
I
​t
I
​
t+1
PB
​t
(B.7.4)
SP
​ =
t
BT
​ ⋅
t+1
∗
​U
​ ⋅
i=61
∑
R
​
utb,t
i,t
12 ⋅
​
(
3
De
​ + De
​ + De
​
i,t
i,t−1
i,t−2 )
(B.7.5)
​
​
De
​
i,t
i
=
​,
L
​
i,t
∗
​
​ ⋅(L
​ + L
​) ⋅1.016
j=i
∑
R
​
utb,t
2
1
j,t
∗
j+1,t
∗
i−j−1
= 61, 62, ..., R
​
 where L
​ = 0
utb,t
R
​+1
utb,t
∗
pension liability in year  in regard to pension commitment for which
disbursement has not commenced (pension liability to the
economically active)
pension liability in year  in regard to pensions being disbursed to
retired persons in the pay-as-you-go system
the sum of pension balances without regard to change in the income
index between year  and 
estimated value of pension credit earned in year  for inkomstpension
according to Ch. 61 §§ 5-10 of the Swedish Social Insurance Code,
calculated according to Ch. 62 § 5, second paragraph of same code
estimated value of ATP, year  for persons who have not begun to
draw this pension
the sum of pension balances for year  according to Ch. 62 §§ 2, 5
and 7 of the Swedish Social Insurance Code
income index for year  according to Ch. 58 § 11 of the Swedish
Social Insurance Code
damped balance ratio, calculated according to Ch. 58 § 20a of the
Swedish Social Insurance Code, when the balance index has been
fixed for the same year
economic annuity divisor for age group  year 
SA
​t
t
SP
​t
t
P B
​
t
∗
t
t + 1
IP R
​t
t
T P
​t
t
P B
​t
t
I
​t
t
BT
​
t
∗
5
De
​
i,t
i
t
Pension Liability, S
127

Footnotes
1. Some editing has been done to simplify the presentation.
2. The minimum age for drawing a pension has been raised in 2020 from 61 to
62. In the end of 2020 there are therefore missing pension payments, 
,
for age 61 and the Pensions Agency therefore considers that 
 is set at 1, i.e. 
.
3. As of 2016, only payments terminated due to death are included. In previous
years payments terminated as a result of pension deferral were also included.
The risk period has been changed to cover an entire year. Previously the only
payments included were those made to individuals who had received at least
one payment in year  (in practice, to be included in the variable, previous
payments in December of year 
 and January of year  was required).
4. As of 2016, only payments terminated due to death are included. In previous
years payments terminated as a result of pension deferral were also included.
5. When the balance index has not been fixed, 
 is set to .
U
​
61,2020
he
he
​ = 1
61,2020
t
t −1
t
BT
​
t
∗
1
128

C.
Appendix List of Terms
(försäkringstekniska avsättningar)
(följsamhetsindexering)
(administrationsavgift)
(delningstal)
(tilläggspension)
(balansindex)
(balanstal)
(balansering)
actuarial provisions
provisions set aside to guarantee the commitment of the insurer in
traditional insurance.
adjustment indexation
annual recalculation of inkomstpension and ATP pension based on the
change in the income index. The change in the index is reduced by the
interest of 1.6 percent credited in the annuity divisor. Note that there is no
adjustment index, only adjustment indexation. If the income index for year 
is designated by 
 the adjustment indexation is calculated as follows: 

Adjustment indexation (at the turn of the year 
)=

During a balancing period, the income index is replaced by balance index.
administrative costs
fee to cover costs of administration and operations, (see Appendix A).
annuity divisor
a number used to calculate pension amounts in premium-based pension
insurance. The annuity divisor reflects remaining life expectancy at
retirement, taking into account the imputed interest credited to the pension
(see Appendix A). Economic annuity divisors are used for calculating the
pension liability (see Appendix B).
ATP
part of the national public pension calculated according to the ATP system.
Supplementary pension refers to the former ATP plus folkpension and is paid
to all persons born before 1938. Persons born between 1938 and 1953
receive a certain number of twentieths of their income-related pension as
ATP and the remaining number of twentieths as inkomstpension and
premium pension. The respective number of twentieths depends on the year
of birth. The ATP system was a defined-benefit pension system. The ATP
portion of the ATP plus folkpension is equal to 60 percent of the average
pension points for the 15 years with the most pension points; the
folkpension portion is equal to 96 percent of one price-related base amount
for single pensioners and 78.5 percent for married pensioners. To receive a
full pension, an individual must have at least 30 years of pension-qualifying
income.
balance index
replaces the income index during a balancing period. When balancing is
activated, pension balances and pensions are indexed by the change in a
balance index instead of the income index.
balance ratio
a number that expresses the relationship between assets and pension
liability in the inkomstpension and ATP pension system (see Appendix B).
balancing
a method for restoring financial balance in the inkomstpension and ATP
pension systems of the national pension. Balancing is activated if the
balance ratio drops below 1.0000, that is, if the pension liability exceeds the
1
t
I
​t
(t −1) →t​
1,016
I
​/I​
t
t−1
List of Terms
129

(buffertfond)
(kapitalviktad avkastning)
(avgiftstak)
(intjänandetak)
(förräntning)
(avgiftstillgång)
(avgiftsunderlag)
(avgiftsinkomst)
(dämpat balanstal)
(statlig ålderspensionsavgift)
assets of the system, and ends when the balance index reaches the same
level as the income index.
buffer fund
absorbs interperiod discrepancies between pension contributions and
pension expenditure in a pay-as-you-go system. The primary purpose of the
buffer fund is to stabilize pension disbursements and/or pension
contributions in relation to economic and demographic variations. The buffer
fund of the national public pension system consists of five different funds:
the First-Fourth and Sixth National Pension Funds.
capital-weighted return
another term for the capital-weighted return is internal rate of return. In the
premium pension system, the measure is used in evaluating individual
accounts, but also for the system as a whole. Consideration is given to the
point in time and amount of all paid-in pension credit and pensions
disbursed as well as pension account balances at the end of the period. The
capital-weighted return corresponds to the average annual return during the
period and may be compared, for example, with the interest on a bank
account. The Pensions Agency’s calculation of the capital-weighted return
for the premium pension includes in the return not only the change in value
of the funds concerned, but also inheritance gains, bonuses and
management fees. For more detailed information, see Appendix A.
ceiling on contributions
the highest income on which the national pension contribution and the
central-government pension contribution can be based, equivalent to
8.07 income base amounts.
ceiling on pension-qualifying income
the highest income, after deduction of the individual pension contribution,
for which pension credit is earned. It corresponds to
7.5 income base amounts.
central government old-age pension contribution
a pension contribution paid by the central
government. The contribution is
10.21 percent of pension-qualifying social-insurance benefits, except for
sickness and activity compensation (disability pension). For sickness and
activity compensation and so-called pension qualifying amounts, the
contribution is 18.5 percent.
compounding
in this report, synonymous with indexation.
contribution asset
the value of the flow of contributions to the inkomstpension. Calculated by
multiplying the contribution revenue by turnover duration.
contribution base
the incomes and amounts on which a pension contribution is to be paid.
Consists primarily of earnings, but also of social insurance benefits, such as
sickness cash benefits and unemployment cash benefits, as well as pension-
qualifying amounts.
contribution revenue
the total pension contributions paid to the pay-as-you-go system in one year.
damped balance ratio
the damped balance ratio for a year is equal to 1 plus one-third of the
difference between the balance ratio fixed for that year and the number 1.
The damped balance ratio is rounded to four decimal places.
2
130

(förmånsbestämt pensionssystem)
(avgiftsbestämt pensionssystem)
(fond)
(fondtillgång)
(fondförsäkring)
(fondstyrka)
(fonderat system)
(garantiregel/garantitillägg)
(garantipension)
(intjänandeålder)
(inkomstindex)
(inkomstgrundad ålderspension)
defined-benefit pension system
a pension system where pensions are set in advance to a fixed amount or a
certain percentage of, for example, final salary or average earnings during a
specified number of years. In a defined-benefit pension system the financial
risk - due to variations over time in return on the system’s assets and in
mortality rates - is borne by the insurer. In a public pension system, the
insurer is the taxpayers, which means that contributions/taxes to the system
may vary.
defined-contribution pension system
a pension system in which pension credit in monetary terms accrues by the
same amount as the pension contribution paid by or for the individual. In a
defined-contribution pension system, the insured bears the financial risk
deriving from the variability over time in the mortality rate and in the rate of
return on the assets of the system. This means that the value of the pension
is not guaranteed but may vary.
fund
a legal entity operated by a fund management company. The fund
management company invests in securities in which investors in turn can
buy shares.
fund asset
the value of the assets at the end of the confirmation year.
fund insurance
pension insurance where capital is invested in funds that may be selected via
an insurance company. Through their choice of funds, the insured decide
how to invest their saving and bear the risk associated with the development
of their pension balances.
fund strength
the monetary amount of the buffer fund at the end of a given year divided
by the pension disbursements for the same year. It is a measure of the size of
the buffer fund in relation to the flow of pension payments.
funded system
a pension system in which contributions or premiums paid in are placed in
funds and saved separately for each individual or for a collective. The
premium pension system is an example of a funded system.
guarantee rule/guaranteed supplement
an amount by which ATP pension is raised for those born 1938–1953 to
ensure they will not receive lower pensions than what they earned up to and
including 1994.
guaranteed pension
portion of the national public pension paid to those with little or no
inkomstpension and/or ATP pension.
income age
indicates the average expected capital-weighted age for earned pension
credit.
income index
the change in the income index shows the development of the average
income each year. The measure of income used here is pension-qualifying
income, without limitation by the ceiling, but after deduction of the
individual pension contribution, (see Appendix A).
income-based old-age pension
the inkomstpension and ATP plus the premium pension.
3
131

(inkomstbasbelopp)
(indexering)
(allmän pensionsavgift)
(arvsvinst)
(inkomstpension)
(internränta)
(AP-fonderna)
(allmän pension)
(ålderspensionsavgift)
(fördelningssystem)
(utbetalningsålder)
(pensionsbehållning)
income base amount
base amount which is recalculated each year according to the change in the
income index. The income base amount is used primarily to calculate the
ceilings on contributions and pension-qualifying income.
indexation
recalculation of pension balances by the change in the income index, or
balance index, and the recalculation of pensions by adjustment indexation.
individual pension contribution
pension contribution paid by each person individually via income tax. It
corresponds to 7 percent of income up to the ceiling for contributions.
inheritance gain
pension balance or insurance capital from a deceased insured person that
goes to survivors in the insurance collective. In the national public pension,
this refers to inkomstpension assets and premium pension capital inherited
by the surviving insured (see Appendix A).
inkomstpension
the portion of the national public pension where the contribution, 16
percent of the pension base, is paid to a pay-as-you-go system.
internal rate of return
see capital-weighted return.
National Pension Funds
legally and administratively, the buffer fund of Sweden’s pay-as-you-go
pension system consists of five different funds: the First, Second, Third,
Fourth and Sixth National Pension Funds. Pension contributions are
apportioned equally to the First-Fourth National Pension Funds, which also
contribute equally to the payment of pensions. The Sixth National Pension
Fund receives no pension contributions and pays no pensions. From the
standpoint of the pay-as-you-go system, the five buffer funds may be viewed
in some respects as a single fund.
national public pension
pension provided for by law. The national public pension is governed by the
Social Insurance Code and consists primarily of the inkomstpension, the ATP
pension, the premium pension and the guaranteed pension.
old-age pension contribution
paid by employers as an employer contribution and by self-employed
persons as an individual pension contribution. The contribution rate for the
old-age pension is 10.21 percent. It is paid on the individual’s entire income,
but the contribution levied on the portion of income above the ceiling is not
credited to the pension system, but to the central government.
pay-as-you-go pension systems
pension system in which pension contributions or premiums paid in during a
given year are used to finance disbursements the same year. In a PAYG
system with a buffer fund, any surpluses are used to finance deficits in other
years.
payment age
indicates the expected average capital-weighted age for pension payments.
pension balance
the value of earned pension credit within the national public pension at any
given time. The pension balance for inkomstpension, after deduction of
administration costs, is the sum of pension credit each year, adjusted to
132

(pensionsunderlag)
(pensionsavgift)
(pensionsrätt)
(pensionsskuld)
(pensionspoäng)
(pensionsgrundande belopp)
(pensionsgrundande inkomst)
(potentiell BNP)
reflect inheritance gains distributed and recalculated by changes in the
income index or the balance index.
pension base
the total of an individual’s pension-qualifying income and pension-
qualifying amounts, but no higher than 7.5 income base amounts per year.
pension contribution
contribution to the national public pension. See individual pension
contribution, old-age pension contribution and central-government old-age
pension contribution.
pension credit
amount set aside each year for inkomstpension and premium pension. An
individual’s pension credit is 18.5 percent of her/his total pension base and
equal to her/his total contribution to the pension system. Individuals born in
1954 or thereafter are credited with 16 percent of their pension base for the
inkomstpension and with 2.5 percent of their pension base for the premium
pension.
pension liability
in this report, the financial commitment of the pension system at the end of
each year. For the inkomstpension, the pension liability to the economically
active is calculated as the sum of the pension balances of all individuals. The
pension liability to retirees is calculated by multiplying the annual pension
amount of each birth cohort by the economic annuity divisor for that cohort.
Through 2017 the pension liability will also be calculated for the ATP credit
earned by the economically active. With fund insurance, the pension liability
for the premium pension is calculated as the total value of all fund shares;
with traditional insurance, the pension liability is calculated as each
guaranteed amount multiplied by an annuity divisor.
pension points
points in the national public pension for persons born 1938-1953 which are
calculated annually on the basis of pension-qualifying income and are used
to calculate ATP pension. Pension points are calculated as follows:



 pension-qualifying income

 the higher price-related base amount
pension-qualifying amounts (PGB)
basis for pension credit in the national public pension for a fictive income
for: years with small children, studies, national service, sickness or activity
compensation.
pension-qualifying income (PGI)
income used as a basis for calculating pension credit in the national public
pension. In principle, pension-qualifying income consists of annual income
(earnings, sickness cash benefits, parental cash benefits, unemployment
cash benefits, etc.) reduced by the individual pension contribution.
Beginning in 2003, annual income must exceed 42.3 percent of one price-
related base amount to qualify for pension credit.
potential GDP
the level of gross domestic product (GDP) that would arise in the absence of
cyclical fluctuations and which in the long term is compatible with stable
inflation. Potential GDP cannot be observed in the data but is the result of
an assessment. The difference between actual and potential GDP, the so-
Pension points =
​
HP BB
P GI −HP BB
PGI: 
HPBB:
133

(premiepension)
(prisbasbelopp)
(riktålder)
(resursutnyttjande)
(avkastning)
(tidsviktad avkastning)
(traditionell försäkring)
(omsättningstid)
called GDP gap, indicates which cyclical phase the economy is currently in. If
the gap is positive, the economy is experiencing a boom, if the gap is
negative the economy is in recession.
premium pension
part of the national public pension in which the contribution, consisting of
2.5 percent of the pension base, is invested in funds.
price-related base amount
an amount used in the national pension system for purposes including
calculation of the guaranteed pension. The price-related base amount is
recalculated each year according to the change in the Consumer Price Index
(for June). In addition there is a higher price-related base amount, which is
used to calculate pension points and also follows changes in the Consumer
Price Index.
recommended retirement age
age to which pension benefits and calculations are linked. The
recommended retirement age serves as a benchmark for the earliest date on
which the national public pension should be drawn. The date of when
entitlement to the basic benefits of the national public pension can occur is
also guided by the recommended retirement age.
resource utilization
indicates the extent to which the economy’s productive resources – labour
and capital – are being utilized. Full resource utilization means the economy
is in balance.
return
income that results from an investment. For shares of stock, the return may
consist of a dividend and the change in the market price. In this report, the
concept refers to the direct return plus the change in value of the buffer fund
and the premium-pension funds.
time-weighted return
the time-weighted return is used to describe the change in value of a fund or
index. The measure shows the return on a deposit made at the outset of the
period, without consideration of whether additional deposits or withdrawals
have been made during the period. For more detailed information, see
Appendix A.
traditional insurance
pension insurance where the insurance company decides how the insurance
capital is to be invested and provides some form of guaranteed payments
together with the chance to receive a share of any surplus.
turnover duration
reflects the expected time from the earning of pension credits to their
payment in the form of inkomstpension. The turnover duration is calculated
as the difference between payment age and income age. The turnover
duration is used to value the flow of contributions. It is determined by the
rules for earning pensions and pension payments and by the earned income
and mortality patterns of each age group.
4
134

Footnotes
1. For amounts and values, see Statistik och publikationer at
www.pensionsmyndigheten.se
2. For amounts and values, see Statistik och publikationer at
www.pensionsmyndigheten.se
3. For amounts and values, see Statistik och publikationer at
www.pensionsmyndigheten.se
4. For amounts and values, see Statistik och publikationer at
www.pensionsmyndigheten.se
135