How the new occupational pension agreements affect employers

On 1 January 2023, new terms and conditions affecting state pensions came into force. The Swedish parliament's decision to make these changes is based on an agreement reached by the parliamentary working group for pensions in December 2017. The changes mean that adjustments to certain occupational pension agreements have also been made.

Some of the changes to the state pension may mean that you need to take action as an employer, although there are also changes that only affect employees. The changes and adjustments that need to be looked into depend on the particular collective agreement. Below, we present the concerned agreements and the associated changes.

Which agreements are affected by the new rules?

How this affects you as an employer depends on which agreements you are a party to. The agreements requiring some form of action are:

• Supplementary pension for industry and trade (ITP1 and ITP2)
• Occupational pension for banks (BTP1 and BTP2)
• Pension agreements for local and regional authorities (KAP-KL, AKAP-KL, AKAP-KR and SAP-R)
• SAF-LO collective pension insurance for the private sector

Below, we have listed the changes to each of these agreements.

ITP – Supplementary pension for industry and trade

ITP ( Industrins och Handelns Tilläggspension) comprises two agreements – ITP1 and ITP2.

ITP1 mainly encompasses employees born in or after 1979 and is solely premium-based – 4.5% up to 7.5 income base amounts (for 2023, 1 IBA = SEK 74,300) and above that 30% up to the cap of 30 IBAs. (Employees born before 1979 may also be encompassed by this agreement, although in such cases this is due to conditions for which the employer is responsible.)

ITP2 encompasses employees born in or before 1978 and comprises a defined-benefit retirement pension. This means that the pension is predetermined as a percentage of the employee's salary. Occupational pension rights are earned until the age of 65. The calculation is performed by Alecta, which also manages this pension.

ITP1 news and changes

• The upper age limit for earning rights has been raised from 65 to 66 as of 1 January 2023.
• An income cap on earnings has been introduced and is now a maximum of 30 IBAs. Amounts above this limit are not pensionable.

ITP2 news and changes

• The age limit for disability pension has been changed. In the case of long-term illness, the age limit has been raised to 66. This applies to illness occurring after 1 January 2023. Illness that occurred before this date falls under the old rule with an age limit of 65.

Actions for employers

The following is not new, so please consider it a reminder. As an employer, if you have employees encompassed by ITP 2 who wish to continue working after 65, they can continue to earn occupational pension rights. This is not new, but please consider it a reminder as it requires action on the part of the employer. Either a contract or an agreement needs to be entered into between the employer and the employee being offered occupational pension rights when continuing to work after 65, or else a section needs to be added to your pension or HR policy stipulating that you offer this to all employees who wish to continue working after 65.

The same applies to employees encompassed by ITP1, although here the upper age limit is 66. If the employee is to continue earning occupational pension rights, payroll must be informed.

As an employer, when you wish to offer your employees an additional benefit, this must always be documented so that your intentions at any given time are clear to everyone.

BTP – Occupational pension for banks

BTP ( Bankernas Tjänstepension) is comprised of two agreements – BTP1 and BTP2 – and encompasses banking and finance employees.

BTP1 encompasses staff employed on or after 1 February 2013. BTP1 is solely premium-based (4.5% up to 7.5 IBAs and above that 32% up to the cap of 30 IBAs).

BTP2 encompasses staff employed before 1 February 2013. BTP2 is benefit-based. This means that the pension is predetermined as a percentage of salary.

BTP1 news and changes

• The holiday pay supplement has been replaced with a larger occupational pension allocation. As of 1 January 2023, 32% rather than 30% will be allocated to the occupational pension.

BTP2 news and changes

• The holiday pay supplement has been replaced with a larger occupational pension allocation. As of 1 January 2023, 4% (previously 2%) will be allocated to the occupational pension component known as BTPK. Exceptions are made for employees born in or before 1966, who are instead covered by the old rule.

Actions for employers

Inform employees that a change has been made to the agreement giving them a larger occupational pension instead of the previous holiday pay supplement of 1.45%.

KAP-KL, AKAP-KL, AKAP-KR and SAP-R – Pension agreements for local and regional authorities

The agreements for local and regional authorities are also split into different agreements: KAP-KL, AKAP-KL, AKAP-KR and SAP-R. AKAP-KR is new to the occupational pension offering for local and regional authorities and came into force on 1 January 2023. The "L" has been replaced by "R" in the name as the county council ( landsting) is now a region.

About KAP-KL

KAP-KL is both premium and benefit-based and encompasses employees who:

• prior to 2023 suffered diminished work capability and have been granted sickness or activity compensation or an annuity of at least fifty (50) percent
• prior to 2023 began drawing their defined-benefit retirement pension
• were granted a special collective agreement pension no later than 31 December 2022
• continue to earn defined-benefit retirement pension rights under the KAP-KL agreement and have chosen to remain under this agreement

KAP-KL news and changes (applicable to employees born in or before 1957)

Some employees may be offered the choice to switch their agreement to AKAP-KR. If, however, the employee would not benefit from such a switch, the offer will not be made.

Actions for employers

Please inform employees who receive an offer to switch to the new AKAP-KR agreement from 1 January 2023 of this change. See below for a description of AKAP-KR.

About AKAP-KL
This agreement has no lower or upper age limit and is solely premium-based.

AKAP-KL news and changes

If an employee born in or before 1957 meets any of the following criteria, they will continue to be encompassed by AKAP-KL when AKAP-KR is introduced on 1 January 2023:

• Employees granted sickness or activity compensation prior to 2023
• Employees drawing a partly defined-benefit retirement pension
• Employees granted a special collective agreement pension no later than 31 December 2022
• Employees born 1958–1985 who as of 31 December 2022 continued to earn defined-benefit retirement pension rights

Actions for employers

Inform employees that AKAP-KL will be closed as of 31 December 2022 and that they will be automatically switched to AKAP-KR unless they meet any of the criteria listed above.

About AKAP-KR

AKAP-KR is new to the occupational pension offering and will encompass all employees previously encompassed by AKAP-KL who meet the criteria for switching to the new agreement.

AKAP-KR news and changes

• Introduced on 1 January 2023.
• Employees born 1958–1985 and currently encompassed by KAP-KL will be automatically switched to AKAP-KR. There are, however, exceptions, as detailed in the section above on AKAP-KL.
• Employees do not need to make a new selection.
• The switch will see pension contributions increase from 4.5% to 6% and from 30% to 31.5%.

Actions for employers

Inform employees about this new agreement with larger allocations that will encompasses everyone switched to AKAP-KR.

About SAP-R

SAP-R is a local authority agreement that encompasses employees within the emergency services.

SAP-R news and changes

• The SAP-R agreement will not be available to staff employed on or after 1 January 2023. New employees will instead receive a supplement of SEK 2,000 a month throughout the time they mainly serve within the emergency services. This amount can comprise an additional contribution to occupational pension, but it can also be paid as salary.
• If an employee has an earlier retirement age under SAP-R but chooses to continue working after this agreed retirement age, the employee will instead receive an increased supplement to their occupational pension of 12% up to a maximum age of 65.

Actions for employers

Inform employees about the latest news concerning SAP-R and follow this up with regular information about deciding how the supplement is to be disbursed.

SAF-LO collective pension insurance for the private sector

SAF-LO collective pension insurance is an occupational pension with the same overall structure for all companies signed up to the agreement. There can be differences between these SAF-LO agreements as regards supplements.

SAF-LO news and changes

• The minimum age for earning pension rights has been changed to 22.

Actions for employers

Please inform employees about this change via your HR and pension policies and in conjunction with recruitment.

Employers and employees face many questions and choices. If you have any questions about policies, how to inform employees about their pensions or other pension-related issues, Azets can help. We are experts in payroll administration, HR and  accounting  and  offer advice  to companies that need help.