As the population is living longer, the Riksdag has decided to adjust the retirement age. This means that from 1 January 2023 the retirement age increases for all citizens born in 1961 and 1962. What does this change involve, and what do employers need to think about?
The decision to adjust the retirement age is based on an agreement reached by the Pension Group, which includes representatives from the Social Democratic Party, the Centre Party, the Liberals, the Christian Democrats and the Moderate Party. The agreement was reached in 2017 and consists of three steps, the first of which came into force in 2020. This meant that the earliest age for drawing a public pension rose to 62. On 1 January 2023, the next step of this agreement will be introduced, which means that the earliest age for drawing a public pension rise to 63. Stage 3 of the agreement involves an additional rise, from 63 to 64, but this is not expected to happen until 2026.
Who is affected by the change in the retirement age?
It is up to each individual when they want to draw a public pension, but there is an earliest age and it is that age that is now being adjusted. The lower limit is now changing from 62 to 63, and this applies from 1 January 2023.
This change affects those born in 1961 and 1962.
When it comes to guarantee pension, income pension supplement and housing supplement, things are a little different. Like the public pension, these apply from a certain year of birth, but you must be at least 66 years old and born in 1958 or 1959 in order to receive these benefits. The lower limit for these benefits was previously 65 years.
If you were born in 1957 or earlier, there are therefore no changes regarding guarantee pension, income pension supplement and housing supplement – the minimum age is still 65.
A new retirement age also means changes in tax rules
As retirement ages change, certain tax rules also need to be adjusted in line with the new age limits.
The increased basic tax-free allowance on pensions will thus increase from 66 years to 67 years. The result of this is that those born in 1957 or later can benefit from the lower tax deduction in the year they turn 67, which will therefore be 2024.
However, there are tax rules that do not need to be adjusted in line with the higher retirement age. One of these is the increased employment tax credit, which is proposed to remain as it is today. This deduction therefore still apply to those who want to continue working after reaching the age of 66.
How do these changes affect me as an employer?
In order for you and your employees to feel confident in dealing with pensions, it may be a good idea to sit down with these points and questions:
- Remind your employees that they should apply to withdraw their pension elements in plenty of time before retiring. All citizens should apply to the Swedish Pensions Agency to have their public pension paid out. Employees may well have had different collective agreements through different forms of employment, and will therefore have different administrators for their occupational pensions. These could include Collectum, Fora, KPA or another pension administrator. In this case, they should apply to these administrators.
- Do you have employees approaching the age of 66? Have you had a conversation with your employees about their future working life? They are entitled to continue working until the age of 69.
- If an employee wishes to reduce their hours, is there a compensation plan?
- Does the company have a policy on continued payment of occupational pension contributions after turning 65 or 66? Most collective agreements have an upper limit for the age at which the employer stops paying an occupational pension. What is the situation for you, and do you want to continue paying if the employee continues working? If so, how do you administer this agreement?
- The employment tax deduction is adjusted via the tax table and applies only to the employee.
- Many employers specify a retirement age in their policies. If you want help reviewing how you inform your employees about this and other aspects of your policy, Azets will be happy to help you.
Prospective retirees and employers face many questions and choices. If you have any questions about policies, how to inform employees about their pensions or other pension-related issues, you are more than welcome to turn to Azets for help.