Sweden’s largest pension fund Alecta says its new analysis of actual pension incomes shows they have risen over each of the four cohorts it studied, from today’s 61 to 81-year-olds, with pension income now amounting to 75% of pre-retirement income on average.

The SEK1trn (€98.3bn) pensions giant also said Swedes on lower incomes in most cases did much better financially as pensioners.

Fredrik Palm, chief analyst at Alecta, said: “The pension system may need to be strengthened and modernised in some places, but our study shows that we have a pension system that is significantly better than its reputation.”

The firm also said poverty was more common among Swedes aged between 20 and 50 than in pensioners up to the age of 80, and that every fourth individual was actually better off as a pensioner.

Staffan Ström, pension economist at Alecta, said: “We must get away from the completely false image that everyone becomes poor by retiring.”

In the study, Alecta said it followed cohorts born in 1941, 1943, 1946 and 1950 from the age of 62, comparing their incomes as pensioners with those from the years before retirement.

“The observed level of 75% of previous income is well above the almost 60% that is often mentioned in the pension debate,” it said.

“The Swedish pension system is far from perfect, but the gloomy picture many have of a system that is collapsing is simply not true”

Staffan Ström, pension economist at Alecta

Alecta also said its study showed that the fifth of people on the lowest incomes at the age of 62 had an income that was between 10% and 20% higher 10 years later.

“One explanation for this is that the basic protections that exist in the pension system – mainly guarantee pensions and housing supplements - offer stronger protection against poverty than the social protection networks that exist earlier in life,” it said.  

Ström said there was a lot of talk in Sweden about poor pensioners “on leaflets and in coffee rooms”, and that there were, of course, older people who did have a hard time.

“The Swedish pension system is far from perfect, but the gloomy picture many have of a system that is collapsing is simply not true,” he said.

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