The Orange Report 2020 describes the financial position of the national income-based pension system at the end of 2020, its evolution in 2020, and three scenarios for the future. To put the national income-based system in context, it is related below to, inter alia, information on occupational and private pensions. However, data for these insurance systems are so far only available up to and including 2019, thus the amounts below refer to 2019. Private pension refers only to data on tax-deductible pension savings.
Total annual fees and premiums for national pension, occupational pensions, and private pensions are estimated at SEK 549 billion, of which the national pension’s SEK 334 billion represents 61 percent. The wage bill in Sweden amounted to approximately SEK 1,940 billion in 2019 (including earnings of the self-employed). This means that we set aside an amount equal to 28 percent of our salaries for various pensions.
Funded capital in the national pension amounted to SEK 3,152 billion on December 31 2019. This corresponds to approximately 46 percent of total funded pension capital in Sweden at one time. The Swedish Pensions Agency paid out SEK 326 billion in inkomstpension and premium pension in 2019. It equates to 67 percent of the total amount paid out that same year.
The Orange Report thus accounts for significantly more than half of Sweden’s pension activities involving contributions and disbursements. The fact that it reflects a lower proportion of funded capital is due to the fact that inkomstpension is a distribution system with a buffer fund and not a fully funded pension system.
In 2019, in addition to inkomstpension and premium pension, the Swedish Pensions Agency paid out guaranteed pension to the amount of SEK 13 billion. Other pension-related benefits paid by the Agency during the year to elderly persons include income-based widow’s pension of SEK 10 billion, housing supplement of SEK 9 billion and maintenance support for the elderly of SEK 1 billion. These benefits are financed from the state budget and are not reported in the Orange Report.
In March 2020, the WHO classified Covid-19 as a pandemic. In February–March, world stock markets fell rapidly and sharply, but recovered in the latter part of the year. The Covid crisis is still hitting large parts of society hard. In Sweden, unemployment has risen and employment has fallen. The impact on the national economy and our future pensions is difficult to predict, as this depends on various factors such as the duration of the pandemic, the evolution of unemployment, and the support measures put in place to mitigate the pandemic’s effects.
The Orange Report, the annual report of the national pension system, shows that the financial position of the inkomstpension system is strong, and that the indexation of pensions paid and pension balances in 2022 will not be affected by the system’s financial position despite the impact of the pandemic on society. The balance ratio for 2022 is already set at 1.0824 and exceeds 1.0000, which means that automatic rebalancing will not be activated. Assets exceeded liabilities by SEK 806 billion. This corresponds to just over 8 percent of the total pension liability.
The report also shows that premium pensions are still being phased in and that premium pension capital continues to grow.
The Swedish Pensions Agency is working to move its operations in a more sustainable direction and contribute to Sweden’s achievement of the Agenda 2030 goals. We see that our actions matter. Our reviews of the funds on the Agency’s fund market show that they generally meet our new requirements in terms of sustainability, commissions, and management. Among premium pension savers, we see an increased interest in sustainability, and we have made it easy to choose sustainable savings on the fund market. Women and younger savers are more likely to actively choose funds with, for example, low carbon risk or to opt out of fossil fuels, pornography, nuclear weapons, and gambling concerns.
In 2020, the adequacy of pensions, as well as the difference between baseline social security and income-based pensions, have continued to be topical issues in the public debate. In December, Parliament decided to increase the pensions of some people through an inkomstpension complement, which is a supplement to the national public pension for those with long working lives at low pay. The inkomstpension complement will be paid as of September 2021 and will be financed from the national budget rather than from pension contributions.
In 2020, the minimum age for taking national public pension was raised from 61 to 62, and the rules for the allocation of inheritance gains were adjusted. The pension system is fundamentally stable, but a recession can lead to a reduction in payments. The future scenarios in the Orange Report show that assets are expected to be sufficient to avoid rebalancing even under pessimistic assumptions about future developments.
Daniel Barr
Director General, Swedish Pensions Agency
As of 2020, Orange Report is published only on the web.
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The full report can also be downloaded in PDF by clicking on this link: Orange Report.
