Social Security (Sweden)

Social Security (Sweden)

Sweden's social democratic economic formula, a capitalist system interlarded with substantial welfare elements, was challenged in the early 1990s by high unemployment. However, fiscal discipline over the past several years has allowed the country to weather economic challenges.

Government pension system

Between 1998 and 2001 the pension system was converted from a PAYGO system with government managed funds (AP-funds) to a system which also includes some money that is saved and invested in individual funds. An important factor is that future pensions are now indexed to GDP growth, ensuring sustainability even in the event of unfavourable economic development.

Government pension payments are financed through an 18.5% pension tax on all taxed incomes in the country, which comes partly from a tax category called a public pension fee (7% on gross income), and 30% of a tax category called employer fees on salaries (which is 33% on a netted income). Since January 2001 the 18.5% is divided in two parts, 16% goes to current payments. And 2.5% goes into individual retirement accounts, which was introduced in 2001. Money saved and invested in government funds and IRAs for future pension costs are roughly 5 times annual government pension expenses (725/150).

There are five government funds that manage money for future retirees.

Levels and flows

Levels from 2004 and flows (during 2003 unless otherwise noted)
*Government pension expenses: 155 billion kronor
**Government IRA pension payments: 11 billion kronor
*Taxes reported as going to government pensions costs (14% of this (2.5/18.5) is going to the "PPM" IRAs)
**"Public" pension "fee": 71 billion kronor
**Employer "fees" (30% of them): 105 billion kronor
*Saved and invested money in IRAs and in five government funds: 725 billion kronor
**Five government "buffert" funds assets: 605 billion kronor
***The "first" government pension fund: 148 billion kronor [http://www.ap1.se]
***The "second": 149 billion kronor [http://www.ap2.se/template/informationpage____5062.asp]
***The "third": 152 billion kronor [http://www.ap3.se/]
***The "fourth": 143 billion kronor [http://www.ap4.se/]
***The "sixth": 13 billion kronor [http://www.apfond6.se]
**Government individual retirement account assets: 120 billion kronor [http://www.ppm.nu/tpp/infodocument/1:1;218,200432,;:]
***The "seventh" government pension fund for IRA money: 39 billion kronor

Additional links

* [http://www.forsakringskassan.se/sprak/eng/ Swedish Social Insurance Agency]
* [http://www.ppm.nu/tpp/infodocument/1:1;201469,201304,201475,201481;: The Premium Pension Authority]
* [http://www.forsakringskassan.se/filer/publikationer/pdf/par05-e.pdf The Swedish Pension System Annual Report 2005]

ee also

*Economy of Sweden
*Income tax
*Social security
*Social Model
*Unemployment benefits in Sweden

External links

* [http://www.sweden.gov.se/sb/d/2197 Health care, health, social issues/insurance]
* [http://www.forsakringskassan.se/sprak/eng/pension/ Pensions in Sweden (official site)]


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