Sweden adjusts ITP’s occupational pension rules
- Introduction of a salary cap for people born after 1978 who earn an ITP1 pension. Individuals do not receive pension contributions on income that exceeds 30 basic income amounts (equivalent to SEK 177,500 per month in 2022). The ITP1 ceiling is the same amount that applies to defined benefit (ITP2) for individuals born before 1979.
- Increased age for earning ITP1 defined contribution pension to 66 years — the age that applies to defined benefit ITP2 pensions is unchanged.
- Increased age for ITP early pension to 66 years for both ITP1 and ITP2 pension.
Moreover:
- ITP1 pensionable salaries are reported monthly, which means that employees who have paid an annual bonus may exceed the salary ceiling for that particular month, and will not be entitled to pension contributions on bonus payments that exceed the salary ceiling.
- As ITP1 is part of a collective agreement, employers are not legally obliged to compensate employees for ‘lost’ business contributions, unless a separate collective agreement is in place.
- Employees who are eligible for defined benefit ITP2 and who earn a salary in excess of 10 earnings base amounts can currently choose to switch to ITP1 if their employer allows it. Some higher paid employees may have moved over to take advantage of the absence of an ITP1 salary cap.
ITP1 is a defined contribution pension that covers civil servants born in 1979 and after they started at age 25. Currently, ITP1 employer contributions correspond to 4.5% of the salary up to SEK 44,375 and 30% of the amount that exceeds SEK 44,375. IPT2 is a defined benefit pension that covers civil servants born in 1978 or earlier. The occupational pension system ITP has been approved by the Civil Servants’ Negotiation and Cooperation Council (PTK), consisting of 27 trade unions representing 860,000 civil servants in the private sector and Swedish Business and Industry, which represents 49 member organizations and 60,000 member companies.