CMS Expert Guide to Pensions in Sweden

The Swedish pension system consists of two main components: the state pension and the occupational pension. 

State pension
The state pension is divided into two parts:

• Income-based pension – This is determined by your salary over your working life. The amount you receive is based on your lifetime earnings.
• Premium-based pension – A portion of your income is set aside and invested by you. The final pension amount depends on the performance of these investments and may therefore vary at retirement.

If the state pension is insufficient, a guarantee pension may be available. 

Occupational pension
Occupational pensions are most commonly classified as:

• A defined contribution plan, in which contributions are invested from the start of your working life until retirement. Employees often have some influence over how these funds are invested. The final pension amount depends on investment performance.
• A defined benefit plan, in which the pension amount is more predictable and typically linked to final salary. It is common for part of the contribution in defined benefit plans to be premium-based. These plans are being gradually phased out but still apply to many individuals who have not yet retired.

Occupational pensions are typically part of collective bargaining agreements, but are also widely provided by employers outside such agreements.

Occupational pension plans are very common in the Swedish labour market. 

Defined benefit pensions are gradually being phased out, although they remain common among those nearing retirement. These have largely been replaced by defined contribution pensions, under which the employer allocates a specific amount – typically calculated as a percentage of the employee’s remuneration. Contributions are generally managed by an occupational pension provider, usually through a pension insurance plan. In many cases, employees can choose how their funds are invested, based on their individual preferences.

For employers covered by a collective bargaining agreement, offering an occupational pension is mandatory if it is included in the agreement. 

For employers not bound by such an agreement, providing an occupational pension is optional; however, there is a strong norm in the Swedish labour market that it should form part of the overall compensation package.

Only pension plans linked to employment and funded by the employer qualify as occupational pension plans. In certain circumstances, employees may make private pension contributions that are tax-deductible, provided they do not receive an occupational pension from their employer.

Only approved entities may operate a pension plan, such as:

• Occupational pension companies – authorised by the Swedish Financial Supervisory Authority (in Swedish: Finansinspektionen).
• Insurance entities – authorised by the Swedish Financial Supervisory Authority.
• Pension foundations – used to secure pension commitments. These must comply with specific regulations and obtain approval from both the relevant County Administrative Board (in Swedish: Länsstyrelsen) and the Swedish Financial Supervisory Authority.

If covered by a collective bargaining agreement, occupational pension contributions will be determined by that agreement. For others, there are no mandatory contributions to an occupational pension, apart from any amounts specified in the employment contract.

Defined benefit pensions can be secured through insurance, by allocation to a pension foundation, or by provisions in the balance sheet combined with credit insurance. Collective bargaining agreements may place restrictions on the types of security arrangements that can be used. 

Occupational pensions managed by an occupational pension company or an insurance entity must be operated with satisfactory solvency, liquidity, and control over insurance, investment, and operational risks, proportionate to the scope and nature of the business, to ensure that commitments can be met.

7. What age are benefits taken?

The age at which the income-based state pension can be withdrawn is 63 in 2025, but this is set to increase over the coming years. For example, individuals born between 1970 and 1980 are expected to be able to withdraw an income-based state pension at the age of 65. 

An occupational pension can generally be withdrawn from the age of 55 at the earliest. 

Employees may choose to work beyond the pensionable age and have the right to remain in employment until the end of the month in which they reach the age of 69.

The cost varies depending on the arrangement, but it is typically borne by the employer.

For an occupational pension contribution to be tax-exempt for the employee, it must be allocated to an occupational pension plan that meets the tax conditions for qualification.

A special payroll tax (in Swedish: särskild löneskatt) of 24.26% is typically applied to the contribution and paid by the employer.

The beneficiary of an occupational pension insurance policy pays yield tax annually on the total value of the pension insurance. 

If the employer instead allocates funds for occupational pension in its balance sheet, it is the employer who pays the yield tax.

12. Are benefits taxed?

Pensions received in respect of prior employment and the various national pensions (including old-age, early retirement, disability, and widow’s pensions) are taxable as employment income. Pensions received on the basis of life insurance are tax-free.

Salary exchange (in Swedish: löneväxla) is an arrangement where an employee agrees to reduce their salary in exchange for increased pension contributions. The employer pays a special payroll tax on the exchanged amount, which is lower than the standard employer contributions, and many employers pass this saving on by contributing the difference to the employee’s pension.

It is particularly beneficial for high-income earners, typically those with a salary above SEK 54,167 per month in 2025, as this salary level maximises state pension contributions and is subject to state income tax.

As a general rule, the employer can deduct pension costs for each employee only if the cost does not exceed 35% of their annual salary. In addition, the deduction cannot be higher than 10 price base amounts. For the 2025 tax year, one price base amount is SEK 58,800.

The Swedish Financial Supervisory Authority has primary responsibility for supervision. In the case of pension foundations, supervision is shared with the county administrative boards: the county administrative boards retain legal supervisory powers, while the Swedish Financial Supervisory Authority is responsible for financial supervision. 

The authority has extensive powers, including the ability to request information, intervene and order corrective actions, and ultimately revoke a licence. 

Pension providers have a comprehensive obligation to report information, and the Swedish Financial Supervisory Authority can also request additional information. Furthermore, auditors are required to report certain irregularities to the agency.

If an occupational pension company or insurance company is declared bankrupt, the Swedish Financial Supervisory Authority must appoint a public representative. This representative works alongside the ordinary bankruptcy trustee in managing the estate and is responsible for ensuring that policyholders and other entitled beneficiaries benefit from the preferential rights provided under the insurance agreements. 

There is a general prohibition on employers discriminating against employees, including in matters relating to pensions.

There is a general prohibition against an employer discriminating against employees, including pension-related matters.

If the occupational pension plan is a defined benefit plan, switching to a defined contribution plan can create issues, as a larger share of the contributions in a defined benefit scheme is typically made later in an employee’s career. 

By contrast, an occupational pension based on fixed contributions distributes contributions more evenly over the course of a career, which means the impact of leaving employment early is less significant.

The right to an occupational pension is often governed by a collective bargaining agreement, so the current system is largely the result of negotiations between trade unions and employers’ organisations. The unions and employers’ organisations also co-own several companies responsible for managing occupational pension plans.

See above.

For employers to make deductions for foreign pension commitments, several conditions must be met, including the structure of the foreign pension and the rules governing withdrawals.

In the context of cross-border employment, when employees work in other EU countries or have pension commitments abroad, these foreign pensions can be included in Swedish pension calculations, provided they meet the necessary criteria. The Swedish Pension Agency will liaise with the relevant foreign authorities to verify periods of employment and pension entitlements.

If the occupational pension plan is part of a collective bargaining agreement or specified in the individual employment contract, the employer generally cannot unilaterally change the pension plan. However, if the occupational pension contribution is based solely on company policy, it is usually possible for the employer to change the plan.