Signal & Brus

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Expressen tells the story of Kerstin, 68, who receives about SEK 15,000 a month in pension after 43 years of working. It raises a larger question: why do we measure retirement age mainly by how old you are, rather than by how long you have actually worked?

My starting point is simple: someone who has worked and paid into the pension system for, say, 40 years should have earned the right to retire on full terms.

Forty working years should count more than a birthday

Someone who starts work at 18 or 19 may have worked for almost half a century by the time they reach today’s retirement ages. Someone who spends many years in education enters working life much later.

There is often another difference. Many people who start work early have jobs in which the body is an essential tool. Construction workers, nursing assistants, industrial workers, drivers and many others may have spent a long working life doing physically demanding work.

Looking only at year of birth misses this. After, for example, 40 years of work, people should be able to leave working life without being penalised financially for having started early.

A pension is deferred pay

An important principle behind the pension system is also easily forgotten: a pension is not simply a state handout.

Each year a person works and pays tax, they accrue rights to the public pension. The total pension right is 18.5 percent of pensionable income: 16 percent goes to the income pension and 2.5 percent to the premium pension. The Swedish Pensions Agency explains how pension rights are earned here.

That makes the link between work, contributions and pension important. People need to feel that many years of work genuinely pay off.

Distinguish an earned pension from society’s basic safety net

A pension earned through work is one thing. Society’s basic financial protection for older people is another.

Today, someone with little or no earnings from work may receive a guarantee pension. It is based mainly on the size of the income pension, how long the person has lived in Sweden and their marital status. A full guarantee pension normally requires 40 years of residence in Sweden between age 16 and the year before entitlement begins. The Swedish Pensions Agency sets out the rules here.

I think the distinction between basic protection and an earned pension should be clearer. Someone who has worked in Sweden for 40 years should receive a pension that clearly reflects this compared with someone who has never worked here. That should apply equally to everyone, whether born in Sweden or having immigrated here.

This is therefore about work and contributions, not origin.

Assets in other countries must be treated the same way

People who move to Sweden may come from countries with very different pension systems or without a functioning public pension system. But the absence of a foreign pension does not automatically mean a person lacks financial resources.

Someone may, for example, own a home, land or other property in a former home country. They may also have savings or rental income.

For elderly income support, foreign income and assets must already be taken into account. See the rules for elderly income support. The guarantee pension works differently and is not based on a general assessment of all wealth. Earnings-related pensions and pensions from other countries can, however, reduce the guarantee pension.

The principle should be simple: anyone who needs society’s means-tested basic support should be able to receive it, but the assessment should reflect their actual financial situation, not only the income and assets easiest for Swedish authorities to see. Thorough checks of assets in other countries are needed too.

A Swedish-born pensioner with money in the bank or other declared assets should not be treated differently from a foreign-born pensioner with equivalent assets in another country. The same rules and disclosure requirements should apply wherever the assets are. The difference is that assets in Sweden are usually easier to check, for example through the Swedish Mapping, Cadastral and Land Registration Authority’s property register and the Swedish Companies Registration Office’s beneficial ownership register.

Basic protection should provide security; a full working life must bring more

The purpose of basic protection should be to guarantee a reasonable standard of living. Someone who could not earn their own pension should not be left without a roof over their head or food for the day.

But someone who has worked and paid into the system for 40 years should reasonably expect something more than basic protection.

I do not want to put an exact number on the difference. Should a normal pension after 40 years of work be 30, 50 or 100 percent above the basic level? I leave that open. It requires analysis of both public finances and the pension system.

The principle matters more than the exact percentage: there must be a clear, noticeable financial difference between working and contributing for a full working life and living on society’s basic safety net.

Otherwise, those who finance the system through decades of work and pension contributions are unlikely to see it as fair.

Three principles for a more understandable pension system

Work: After, for example, 40 years in working life, one should be able to receive a full earned pension without waiting for a general retirement age. Of course, we can count only years worked in Sweden that have contributed to the Swedish pension system.

Basic protection: People who have not earned a sufficient pension should still have dignified financial protection. Means-tested support should reflect their actual financial situation, including relevant income and assets abroad.

A clear difference: After a full working life, the pension should provide noticeable financial room above the basic level. Exactly how much is a political and economic judgement, but the difference must be large enough for work and contributions to be felt in retirement.

Ultimately, this is about legitimacy. A pension system must do two things at once: provide decent protection to those with little and give those who have worked a whole life a clear return on their years of work and contributions.

After 40 years of work, you should be able to say: I have done my years, and it shows in my pension too.

This translation was prepared with AI assistance from the author’s Swedish article. The original article was developed with AI assistance, and its featured image is AI-generated.