- actuarial provisions (försäkringstekniska avsättningar)
- provisions set aside to guarantee the commitment of the insurer in traditional insurance.
- adjustment indexation1 (följsamhetsindexering)
- annual recalculation of inkomstpension and ATP pension based on the change in the income index. The change in the index is reduced by the interest of 1.6 percent credited in the annuity divisor. Note that there is no adjustment index, only adjustment indexation. If the income index for year \(t\) is designated by \(I_t\) the adjustment indexation is calculated as follows:
Adjustment indexation (at the turn of the year \((t-1) \to t\))=\(\frac{I_t / I_{t-1}}{1,016}\)
During a balancing period, the income index is replaced by balance index. - administrative costs (administrationsavgift)
- fee to cover costs of administration and operations, (see Appendix A).
- annuity divisor (delningstal)
- a number used to calculate pension amounts in premium-based pension insurance. The annuity divisor reflects remaining life expectancy at retirement, taking into account the imputed interest credited to the pension (see Appendix A). Economic annuity divisors are used for calculating the pension liability (see Appendix B).
- ATP (tilläggspension)
- part of the national public pension calculated according to the ATP system. Supplementary pension refers to the former ATP plus folkpension and is paid to all persons born before 1938. Persons born between 1938 and 1953 receive a certain number of twentieths of their income-related pension as ATP and the remaining number of twentieths as inkomstpension and premium pension. The respective number of twentieths depends on the year of birth. The ATP system was a defined-benefit pension system. The ATP portion of the ATP plus folkpension is equal to 60 percent of the average pension points for the 15 years with the most pension points; the folkpension portion is equal to 96 percent of one price-related base amount for single pensioners and 78.5 percent for married pensioners. To receive a full pension, an individual must have at least 30 years of pension-qualifying income.
- balance index (balansindex)
- replaces the income index during a balancing period. When balancing is activated, pension balances and pensions are indexed by the change in a balance index instead of the income index.
- balance ratio (balanstal)
- a number that expresses the relationship between assets and pension liability in the inkomstpension and ATP pension system (see Appendix B).
- balancing (balansering)
- a method for restoring financial balance in the inkomstpension and ATP pension systems of the national pension. Balancing is activated if the balance ratio drops below 1.0000, that is, if the pension liability exceeds the assets of the system, and ends when the balance index reaches the same level as the income index.
- buffer fund (buffertfond)
- absorbs interperiod discrepancies between pension contributions and pension expenditure in a pay-as-you-go system. The primary purpose of the buffer fund is to stabilize pension disbursements and/or pension contributions in relation to economic and demographic variations. The buffer fund of the national public pension system consists of five different funds: the First-Fourth and Sixth National Pension Funds.
- capital-weighted return (kapitalviktad avkastning)
- another term for the capital-weighted return is internal rate of return. In the premium pension system, the measure is used in evaluating individual accounts, but also for the system as a whole. Consideration is given to the point in time and amount of all paid-in pension credit and pensions disbursed as well as pension account balances at the end of the period. The capital-weighted return corresponds to the average annual return during the period and may be compared, for example, with the interest on a bank account. The Pensions Agency’s calculation of the capital-weighted return for the premium pension includes in the return not only the change in value of the funds concerned, but also inheritance gains, bonuses and management fees. For more detailed information, see Appendix A.
- ceiling on contributions2 (avgiftstak)
- the highest income on which the national pension contribution and the central-government pension contribution can be based, equivalent to 8.07 income base amounts.
- ceiling on pension-qualifying income (intjänandetak)
- the highest income, after deduction of the individual pension contribution, for which pension credit is earned. It corresponds to 7.5 income base amounts.
- central government old-age pension contribution (statlig ålderspensionsavgift)
- a pension contribution paid by the central government. The contribution is 10.21 percent of pension-qualifying social-insurance benefits, except for sickness and activity compensation (disability pension). For sickness and activity compensation and so-called pension qualifying amounts, the contribution is 18.5 percent.
- compounding (förräntning)
- in this report, synonymous with indexation.
- contribution asset (avgiftstillgång)
- the value of the flow of contributions to the inkomstpension. Calculated by multiplying the contribution revenue by turnover duration.
- contribution base (avgiftsunderlag)
- the incomes and amounts on which a pension contribution is to be paid. Consists primarily of earnings, but also of social insurance benefits, such as sickness cash benefits and unemployment cash benefits, as well as pension-qualifying amounts.
- contribution revenue (avgiftsinkomst)
- the total pension contributions paid to the pay-as-you-go system in one year.
- damped balance ratio (dämpat balanstal)
- the damped balance ratio for a year is equal to 1 plus one-third of the difference between the balance ratio fixed for that year and the number 1. The damped balance ratio is rounded to four decimal places.
- defined-benefit pension system (förmånsbestämt pensionssystem)
- a pension system where pensions are set in advance to a fixed amount or a certain percentage of, for example, final salary or average earnings during a specified number of years. In a defined-benefit pension system the financial risk - due to variations over time in return on the system’s assets and in mortality rates - is borne by the insurer. In a public pension system, the insurer is the taxpayers, which means that contributions/taxes to the system may vary.
- defined-contribution pension system (avgiftsbestämt pensionssystem)
- a pension system in which pension credit in monetary terms accrues by the same amount as the pension contribution paid by or for the individual. In a defined-contribution pension system, the insured bears the financial risk deriving from the variability over time in the mortality rate and in the rate of return on the assets of the system. This means that the value of the pension is not guaranteed but may vary.
- fund (fond)
- a legal entity operated by a fund management company. The fund management company invests in securities in which investors in turn can buy shares.
- fund asset (fondtillgång)
- the value of the assets at the end of the confirmation year.
- fund insurance (fondförsäkring)
- pension insurance where capital is invested in funds that may be selected via an insurance company. Through their choice of funds, the insured decide how to invest their saving and bear the risk associated with the development of their pension balances.
- fund strength (fondstyrka)
- the monetary amount of the buffer fund at the end of a given year divided by the pension disbursements for the same year. It is a measure of the size of the buffer fund in relation to the flow of pension payments.
- funded system (fonderat system)
- a pension system in which contributions or premiums paid in are placed in funds and saved separately for each individual or for a collective. The premium pension system is an example of a funded system.
- guarantee rule/guaranteed supplement (garantiregel/garantitillägg)
- an amount by which ATP pension is raised for those born 1938–1953 to ensure they will not receive lower pensions than what they earned up to and including 1994.
- guaranteed pension (garantipension)
- portion of the national public pension paid to those with little or no inkomstpension and/or ATP pension.
- income age (intjänandeålder)
- indicates the average expected capital-weighted age for earned pension credit.
- income index3 (inkomstindex)
- the change in the income index shows the development of the average income each year. The measure of income used here is pension-qualifying income, without limitation by the ceiling, but after deduction of the individual pension contribution, (see Appendix A).
- income-based old-age pension (inkomstgrundad ålderspension)
- the inkomstpension and ATP plus the premium pension.
- income base amount (inkomstbasbelopp)
- base amount which is recalculated each year according to the change in the income index. The income base amount is used primarily to calculate the ceilings on contributions and pension-qualifying income.
- indexation (indexering)
- recalculation of pension balances by the change in the income index, or balance index, and the recalculation of pensions by adjustment indexation.
- individual pension contribution (allmän pensionsavgift)
- pension contribution paid by each person individually via income tax. It corresponds to 7 percent of income up to the ceiling for contributions.
- inheritance gain (arvsvinst)
- pension balance or insurance capital from a deceased insured person that goes to survivors in the insurance collective. In the national public pension, this refers to inkomstpension assets and premium pension capital inherited by the surviving insured (see Appendix A).
- inkomstpension (inkomstpension)
- the portion of the national public pension where the contribution, 16 percent of the pension base, is paid to a pay-as-you-go system.
- internal rate of return (internränta)
- see capital-weighted return.
- National Pension Funds (AP-fonderna)
- legally and administratively, the buffer fund of Sweden’s pay-as-you-go pension system consists of five different funds: the First, Second, Third, Fourth and Sixth National Pension Funds. Pension contributions are apportioned equally to the First-Fourth National Pension Funds, which also contribute equally to the payment of pensions. The Sixth National Pension Fund receives no pension contributions and pays no pensions. From the standpoint of the pay-as-you-go system, the five buffer funds may be viewed in some respects as a single fund.
- national public pension (allmän pension)
- pension provided for by law. The national public pension is governed by the Social Insurance Code and consists primarily of the inkomstpension, the ATP pension, the premium pension and the guaranteed pension.
- old-age pension contribution (ålderspensionsavgift)
- paid by employers as an employer contribution and by self-employed persons as an individual pension contribution. The contribution rate for the old-age pension is 10.21 percent. It is paid on the individual’s entire income, but the contribution levied on the portion of income above the ceiling is not credited to the pension system, but to the central government.
- pay-as-you-go pension systems (fördelningssystem)
- pension system in which pension contributions or premiums paid in during a given year are used to finance disbursements the same year. In a PAYG system with a buffer fund, any surpluses are used to finance deficits in other years.
- payment age (utbetalningsålder)
- indicates the expected average capital-weighted age for pension payments.
- pension balance (pensionsbehållning)
- the value of earned pension credit within the national public pension at any given time. The pension balance for inkomstpension, after deduction of administration costs, is the sum of pension credit each year, adjusted to reflect inheritance gains distributed and recalculated by changes in the income index or the balance index.
- pension base (pensionsunderlag)
- the total of an individual’s pension-qualifying income and pension-qualifying amounts, but no higher than 7.5 income base amounts per year.
- pension contribution (pensionsavgift)
- contribution to the national public pension. See individual pension contribution, old-age pension contribution and central-government old-age pension contribution.
- pension credit (pensionsrätt)
- amount set aside each year for inkomstpension and premium pension. An individual’s pension credit is 18.5 percent of her/his total pension base and equal to her/his total contribution to the pension system. Individuals born in 1954 or thereafter are credited with 16 percent of their pension base for the inkomstpension and with 2.5 percent of their pension base for the premium pension.
- pension liability (pensionsskuld)
- in this report, the financial commitment of the pension system at the end of each year. For the inkomstpension, the pension liability to the economically active is calculated as the sum of the pension balances of all individuals. The pension liability to retirees is calculated by multiplying the annual pension amount of each birth cohort by the economic annuity divisor for that cohort. Through 2017 the pension liability will also be calculated for the ATP credit earned by the economically active. With fund insurance, the pension liability for the premium pension is calculated as the total value of all fund shares; with traditional insurance, the pension liability is calculated as each guaranteed amount multiplied by an annuity divisor.
- pension points (pensionspoäng)
- points in the national public pension for persons born 1938-1953 which are calculated annually on the basis of pension-qualifying income and are used to calculate ATP pension. Pension points are calculated as follows:
\(\displaystyle \text{Pension points} = \frac{PGI - HPBB}{HPBB}\)
\(\text{PGI: }\quad\) pension-qualifying income
\(\text{HPBB:}\quad\) the higher price-related base amount - pension-qualifying amounts (PGB) (pensionsgrundande belopp)
- basis for pension credit in the national public pension for a fictive income for: years with small children, studies, national service, sickness or activity compensation.
- pension-qualifying income (PGI) (pensionsgrundande inkomst)
- income used as a basis for calculating pension credit in the national public pension. In principle, pension-qualifying income consists of annual income (earnings, sickness cash benefits, parental cash benefits, unemployment cash benefits, etc.) reduced by the individual pension contribution. Beginning in 2003, annual income must exceed 42.3 percent of one price-related base amount to qualify for pension credit.
- potential GDP (potentiell BNP)
- the level of gross domestic product (GDP) that would arise in the absence of cyclical fluctuations and which in the long term is compatible with stable inflation. Potential GDP cannot be observed in the data but is the result of an assessment. The difference between actual and potential GDP, the so-called GDP gap, indicates which cyclical phase the economy is currently in. If the gap is positive, the economy is experiencing a boom, if the gap is negative the economy is in recession.
- premium pension (premiepension)
- part of the national public pension in which the contribution, consisting of 2.5 percent of the pension base, is invested in funds.
- price-related base amount4 (prisbasbelopp)
- an amount used in the national pension system for purposes including calculation of the guaranteed pension. The price-related base amount is recalculated each year according to the change in the Consumer Price Index (for June). In addition there is a higher price-related base amount, which is used to calculate pension points and also follows changes in the Consumer Price Index.
- recommended retirement age (riktålder)
- age to which pension benefits and calculations are linked. The recommended retirement age serves as a benchmark for the earliest date on which the national public pension should be drawn. The date of when entitlement to the basic benefits of the national public pension can occur is also guided by the recommended retirement age.
- resource utilization (resursutnyttjande)
- indicates the extent to which the economy’s productive resources – labour and capital – are being utilized. Full resource utilization means the economy is in balance.
- return (avkastning)
- income that results from an investment. For shares of stock, the return may consist of a dividend and the change in the market price. In this report, the concept refers to the direct return plus the change in value of the buffer fund and the premium-pension funds.
- time-weighted return (tidsviktad avkastning)
- the time-weighted return is used to describe the change in value of a fund or index. The measure shows the return on a deposit made at the outset of the period, without consideration of whether additional deposits or withdrawals have been made during the period. For more detailed information, see Appendix A.
- traditional insurance (traditionell försäkring)
- pension insurance where the insurance company decides how the insurance capital is to be invested and provides some form of guaranteed payments together with the chance to receive a share of any surplus.
- turnover duration (omsättningstid)
- reflects the expected time from the earning of pension credits to their payment in the form of inkomstpension. The turnover duration is calculated as the difference between payment age and income age. The turnover duration is used to value the flow of contributions. It is determined by the rules for earning pensions and pension payments and by the earned income and mortality patterns of each age group.
Footnotes
- For amounts and values, see Statistik och publikationer at www.pensionsmyndigheten.se ↩
- For amounts and values, see Statistik och publikationer at www.pensionsmyndigheten.se ↩
- For amounts and values, see Statistik och publikationer at www.pensionsmyndigheten.se ↩
- For amounts and values, see Statistik och publikationer at www.pensionsmyndigheten.se ↩
