Occupational Pension Scheme for Persons Employed by Municipalities or Regions

Mandatory insurance¹

• Persons employed by a municipality or a region from the age of 21.

The scheme contains different pension plans: KAP-KL is applicable to employed persons born 1985 or earlier; AKAP-KL is applicable to persons born 1986 or later.

General finances

KAP-KL

• It is partly a defined contribution scheme, i.e. a fully funded personal pension scheme based on contribution payments and capital revenues and partly a defined benefit scheme.
• It is partly a defined benefit scheme financed by premiums to an insurance company or by debt finance through reservations on the balance sheet, a financial guarantee or by setting up a pension trust. The defined benefit scheme is applicable to persons with a salary over one income base amount per month.

AKAP-KL

• AKAP-KL is a fully funded personal pension scheme based on contribution payments and capital revenues.

Mandatory contribution payments

• Employer pays 4.5% of salary not exceeding 7.5 times the ‘income base amount’ yearly (SEK 501,000) and 30% on gross monthly salary above this level up to a ceiling of 30 ‘income base amounts’ yearly.

Voluntary contribution payments

• It is possible for employees to change part of the gross salary to pension savings and thus top up the premiums paid 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 administration of elective parts of the relevant collective agreement is carried out by Pensionsvalet, part of the insurance company KPA Pensionsservice AB. This company is owned jointly by Folksam (coop insurance company) and the relevant employer organisation.

KAP-KL

• The defined contribution pension can be claimed at the age of 69.
• There is a possibility to start payments at 55.
• Qualification for the defined benefit pension starts from the age of 28; for a full pension it is required to have worked for 30 years. 
• The defined benefit pension can be drawn from the age of 61, and at the latest from 67. If a person exits the labour market before 61 the pension is transformed to an annuity.

AKAP-KL

• The defined contribution pension can be claimed at the age of 69.
• There is a possibility to start payments at 55.

Pension benefits

• Primarily a defined contribution scheme based on the amount of contributory earnings, length of contribution period and capital revenues.
• By default, the accumulated pension capital is paid as a life-long annuity (traditional insurance).
• If no investment choice is made payments will be made with a minimum guarantee.
• If an option has been made to invest in a fund no guarantee is available. Payments are then solely dependent on the value of the accumulated capital.
• The shortest period for defined contribution pension payments (in KAP-KL and AKAP-KL) is five years.

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.