During the summer of 2024, the government proposed to make the occupational pension more flexible and raised the possibility of being able to change the rules around the payment.
In one press release on June 13, they gave an account of how they wanted to change the pension part.
“During the first five payment years of the occupational pension, it will be possible to pause payments and to extend the payment period. The pension group, which includes all parties in the Riksdag, agreed on this in October 2023. Now the government has decided on a bill on this,” they wrote then, before an approval would eventually be announced.
And now it has been clubbed. From 1 January 2025, it will be easier to both pause and extend payments of the occupational pension.
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Photo: Pontus Lundahl/TTRiksdagen said yes – now the occupational pension is changing
On 23 October, the Riksdag announced that the changes had been approved and in the decision it was explained that they had agreed to the proposal to make part of the pension system more flexible.
“The Riksdag said yes to the proposal that it will be possible to pause the payment of an occupational pension during the first five years. It should also be possible to extend the payment period during the first payment years. This means that the so-called five-year rule becomes more flexible. The five-year rule means, among other things, that an occupational pension from a pension insurance or a pension savings account may not be paid out for a shorter period of time than five years,” they wrote in a press release.
But how will this affect pensioners who have an occupational pension in practical terms? According to the pension economist Dan Adolphson Björck are several elements that will be important to know and keep in mind.
– In practice, there will be differences between different occupational pensions. Some occupational pensions are covered from 2025, others only in 2026 or later. The rules will likely vary when it comes to choosing a different withdrawal time. There may be requirements to keep previous choices, but in some cases you will be able to choose a longer withdrawal period, he says News24.
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Dan Adolphson Björck works as a pension economist at minPension. Photo: Press image minPension/Urban Jörén Flexible occupational pension – that’s how it will work
Adolphson Björck believes that the possibility to pause payments will result in you receiving higher monthly payments once you start drawing the pension again.
– Payment of general pension can always be paused, while the conditions for occupational pension will differ. Occupational pensions that have been paid for more than five years cannot be paused, he explains.
The change has been requested in many places. And according to Dan Adolphson Björck, there are those who will want to reduce the pension withdrawal in order not to risk ending up on the “wrong side of the state income tax”.
– When you reduce your working hours, it is common that you start withdrawing some part of your pension. With several incomes deducted according to different tax tables, it is difficult to get an overview of how much money you have today, in a few years and for the rest of your life. Here there are some who will probably want to reduce their pension withdrawal if they find out that they are working more than they had intended, he says and then elaborates further:
– It also happens that pensioners want to return to work, but if you cannot pause your pension payment, some have found it unprofitable if you end up on the wrong side of state income tax.
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They benefit from the new pension rules
He believes that there are clear winners with the decision to enable more flexible withdrawals and to be able to pause the occupational pension.
– In general, those with job bonuses, those who combine work with a pension, benefit because they get greater flexibility. At the same time, there are relatively few who pause withdrawal of public pension and this should lead to a corresponding pattern for the occupational pension as well. Those with high occupational pensions are affected to a greater extent than others.
As there are many who receive a reduced income once they retire, there are also fewer who pay state income tax. He reports that in 2022 roughly one in six people of working age passed the state income tax “break-even” threshold. Among those over 65, it was only one in twenty people.
What do you think of the decision?
– An obstacle for older workers is removed. It is a very welcome change for those affected. All in all, it becomes easier to work higher in the years on your own terms. But one should not exaggerate the importance. It is primarily the conditions on the labor market and our own strength, desire and energy that govern how long we work, emphasizes pension economist Dan Adolphson Björck in conclusion.
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