The Swedish Pensions Agency said individual savers in the first-pillar premium pension system it administers stand to benefit from more frequent distribution of inheritance gains as well as premium pension rights to the tune of about SEK1.4bn (€125m) in higher returns.
The agency, which administers the premium pension system, said on Friday that from 2025, inheritance gains in the SEK2.6trn first pillar defined contribution system of individual accounts would be allocated monthly, rather than once a year as hitherto.
The expected extra annual returns gained from more frequency allocation of inheritance gains are estimated at SEK400m, the agency said.
“In the long term, the new process is expected to contribute to an increase in premium pension by 2% per year,” it said.
The Stockholm-based state agency said it had also been commissioned by the government to investigate whether premium pension rights could be allocated earlier than currently.
While pension rights have been distributed every year in December until now, the agency said that in the future they would be distributed three times a year.
“Once fully implemented, it is estimated that the more frequent distribution of pension rights will provide approximately SEK1bn per year in return to pension savers,” the agency said.
Erland Ekheden, chief actuary at the Swedish Pensions Agency, said: “By allocating inheritance gains and also premium pension rights more frequently in the future, the money is invested in the saver’s chosen funds for a longer period of time.
“This exposes the money to higher risk and an assumed higher growth as a result. In the long run, the pension is therefore expected to be somewhat higher,” he said.
Overall, the agency said, the changes would lead in the long term to an expected increase in the premium pension corresponding to SEK200 a month on average for a newly-retired person today.
Significant boost seen for Danish pension savings from new collective agreements
Pension fund Sampension said pension savings in Denmark may get a large boost from the current round of collective agreements sealed in the Nordic country after one sector’s deal included a step up in voluntary pension arrangements.
The new collective agreement in the industrial sector includes an increase in the so-called “free-choice” pension account by two percentage points – to 11% from 9%, the DKK272bn (€36.5bn) pension provider said.
“The contribution will increase by one percentage point as of 1 March, 2026 and one percentage point as of 1 March, 2027,” it said, adding that the industrial settlement was expected to be copied in the other collective agreement areas where negotiations are currently underway.
Individual employees in Denmark can choose whether the money in their free-choice account goes towards leave, is paid out as salary, or is deposited into pension savings.
Helle Dalsgaard, chief adviser at Sampension, said: “It is entirely up to the individual to assess what the money in the voluntary account should be used for, and many will choose to receive the increased contribution as salary or use it to take time off.
“But at the same time, there is a trend in recent years where we see Danes increasingly prioritising saving and also putting extra into their pension savings,” she said, adding that that trend would also be reflected in some employees letting some of the money from the discretionary account go to their pension.
Sampension said that according to its calculations, if someone on DKK350,000 a year allowed the extra amount in the voluntary account to go towards retirement savings, from the age of 25 and every year towards retirement age, this would boost pension savings by retirement by around DKK705,000, with pension payments rising by some DKK2,500 per month after tax.
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