The so-called respect distance, the difference in pension between those who have worked a full working life and those who have worked little or not at all, has decreased significantly since 2021.
On average, it has decreased by approximately 1,100 kronor per month for full-time working individuals born in the early 1960s.
Must Save More Privately
According to Mattias Munter, this means that individuals born in the 1960s would need to save 5,500 kronor privately to restore the respect distance.
The core of the Swedish pension system is that all life's income should form the basis for the pension. The point is that you should see a difference in the pension envelope. If you no longer do, the drive to work is lost, he says.
The decreased respect distance is mainly due to two factors, according to him.
Since 2021, several political decisions have been made that affect the general basic protection, i.e., the guaranteed pension, says Munter, primarily referring to the increase in the guaranteed pension.
The effect was reinforced when we got high inflation. The guaranteed pension is inflation-indexed and has been affected much more positively than the income-based pension.
Long-term Consequences
When it comes to political decisions, Munter believes that it is primarily an increase in basic protection that has affected the respect distance.
This was done just before the 2022 election, where the Social Democrats pushed very hard. The problem was that the pension became an election issue with short-term promises that we are now beginning to see the long-term consequences of.
Here, I think Sweden needs to find its way back to the order where political decisions on pension reforms are broadly anchored outside of election campaigns.
For a highly paid civil servant born in the 1960s, the respect distance remains unchanged.
The explanation lies in the fact that occupational pensions make up a larger part of the total pension. This means that high incomes are required today for there to be a respect distance and for it to be worth working.
Difference in respect distance between 2021 and 2024. Kronor per month.
.
Privately employed worker born 1962: Minus 1,050 kronor
Municipally employed worker born 1962: Minus 1,100 kronor
Highly paid civil servant born 1962: Unchanged
.
Privately employed worker born 1972: Minus 1,100 kronor
Regionally employed worker born 1972: Minus 1,150 kronor
Highly paid civil servant born 1972: Plus 1,400 kronor
.
Privately employed worker born 1982: Minus 1,350 kronor
Municipally employed worker born 1982: Minus 1,150 kronor
Highly paid civil servant born 1982: Plus 4,100 kronor
.
The respect distance is the total future pension income after tax minus the guaranteed pension and housing allowance that the individual would have received if they had had zero kronor in total work income.
Source: Skandia
