Occupational Pension Scheme for Government Employees

Mandatory insurance

• Persons employed by the government.
• PA 16-1 is a defined contribution scheme applicable to employees born 1988 and after. No lower age limit is applicable and earning of pension rights until the age of 68 is possible. It consists of three parts, an obligatory traditional insurance, a selectable part where the insured chooses the investment form, and a flexible part that can be used e.g. for part-time retirement from the age of 62.
• PA 16-2 is a combined defined benefit and defined contribution scheme applicable to employees born before 1988, available from the age of 23. It consists of three parts, an obligatory traditional insurance, a selectable part where the insured chooses the investment form, and a defined benefit part.

General finances

• PA 16-1 is a fully funded defined contribution personal pension plan based on contribution payments and interest rate.
• PA 16-2 is partly a fully funded defined contribution personal pension plan based on contribution payments and interest rate.
• PA 16-2 is partly a defined benefit pension plan financed by premiums to an insurance company or by reservations on the balance sheet (debt).

Mandatory contribution payments

• Contributions are paid fully by the employer.

PA 16-1

• Employer pays 6% of gross earnings not exceeding 7.5 times the ‘income base amount’ yearly (SEK 501,000) and 31.5% on gross earnings above this level.
• Contributions are distributed to investment in obligatory insurance, selectable insurance and flex insurance.

PA 16-2

• Employer pays 4.5% of gross earnings with contribution assessment ceiling (7.5 times the ‘income base amount’ yearly (SEK 501,000).
• Contributions are distributed to obligatory and selectable insurance.

Voluntary insurance

• In addition, it is possible for employees to change part of the gross salary to pension savings and thus top up the premiums paid mandatorily to the insurance.

Taxation of contribution payments

• Contribution payments, reservation on the balance sheet and transactions to a pension fund are subject to a specific wage tax of 24.26%.
• Wage taxes on pension deposits are lower than ordinary wage taxes on salaries (employer contribution is 31.42%); therefore, pension premiums can be increased by this difference (5.8%) without this constituting an extra cost for the employer.  

• The scheme is administered by the ‘National Government Employee Pensions Board’ (Statens pensionsverk, SPV).
• The obligatory traditional insurance and the flex insurance is managed by a pension association (Kåpan).
• The selectable part of the insurance and fund can be managed by other financial actors (not necessarily Kåpan).

• There is no minimum qualifying period.

PA 16-1

• PA 16-1 (traditional insurance and defined contribution selectable pension) can be paid from the same age onward as the public pension (today 62) or from the age of 72 at the latest. 

PA 16-2

• PA 16-2 (traditional insurance and selectable defined contribution pension) can be paid from the age of 61. The default age for payments is 65, later payment is possible.
• Persons born between 1943 and 1972 also qualify for the defined benefit scheme. The older the person, the larger is the part of the occupational pension which is to be paid out from the defined benefit scheme.
• To receive a full defined benefit pension, the person must have worked for 30 years (360 months) within the state. If the person has worked for less than 30 years, the pension is reduced (by 1/360th for each missing month).

Pension payments

PA 16-1

• PA 16-1 consists of two parts: obligatory traditional insurance, and a selectable scheme where a choice is made between additional pension insurance or fund investments.
• By default, PA 16-1 (obligatory, selectable and flex) is paid out as a life-long annuity. A shorter period can be chosen: the shortest time available is ten years for obligatory, five years for selectable and one year for flex insurance.

PA 16-2

• The obligatory and the selectable traditional insurance have a guaranteed interest rate on investments made. This pension is by default paid as a life-long annuity but can also be paid as an annual pension for between 5 and 20 years. 
• The guaranteed pension payment consists of 80% of paid contributions plus an interest rate.
• If fund insurance is selected, payments are dependent on the return on capital investments.

Taxation and social security contributions

• Pension benefits are subject to income tax.
• Pension benefits are not subject to social security contributions.
• There is a standard tax on the yearly return on capital: approximately 0.5% of the pension capital is taxed with 15%, paid by the trustee.