Please be aware that this article primarily pertains to Swedish rules and regulations, which may not necessarily apply or be valid in jurisdictions outside of Sweden.
We are healthier now than we used to be, and on top of that, we live longer than ever. And that’s nice, of course. But it will also affect our public pension, and we will have to work longer for it to last throughout our retirement. To secure pension capital, flexible pensions could be a good solution. This collective agreement benefit has been described as more money and more time – but how does it work, exactly? Let’s take a closer look at flexible pensions!
What Are Flexible Pensions?
Flexible pensions, sometimes part-time pensions, have existed in Sweden within the public sector since 2003 and were introduced in the private sector in 2013. Flexible pensions are an extra deposit to our pension, to give us more flexibility in how to arrange our work life in the years before and after our retirement. It allows employees to either reduce their working hours at the end of their working life or to get a higher pension. Flexible pension is a benefit that exists in many collective agreements. It consists of two parts:
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The employer pays an extra amount to the employee’s occupational pension.
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The employees have an increased possibility of reducing their working hours from the ages of 60-62.
Which age applies depends on which collective agreement your employees are covered by.
Why Flexible Pensions?
With increased life expectancy but the same retirement age, our public pension will be reduced. Therefore, we will have to work longer for the pension to be enough.
Will It Be More Expensive for Me as an Employer With Flexible Pensions?
No, it won’t be more expensive. This amount is deducted from the total cost pool, just like other benefits.
Good to Know
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When an employee receives the fully earned flexible pension, the occupational pension will not be affected. If, on the other hand, the employee reduces their working hours, the public pension will be affected since they also reduce their earnings.
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Keep in mind that an employee who uses a flexible pension only has the right to return to his/her former employment rate if you have agreed on this. In other words, this isn’t something the employee can decide for himself/herself.
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If your employees want reduced working hours, they must submit a written application to the employer. The collective agreement regulates the time limit for when the application should be handed in.
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The collective agreement regulates the age at which employees can apply for a reduction of working hours.
Can I Deny an Application for Reduced Working Hours?
Yes – under certain circumstances. It is possible if their new employment rate infers any noticeable disruptions for the business, and you as an employer must disclose why the application is denied.
Where Do I Deposit the Flexible Pension Payment?
Regarding the occupational pension (ITP), the employer pays the extra amount to the employee’s existing pension plan. If they have ITP1, the money is placed in the selectable part of ITP1, and if they have ITP2, they are placed in the pre-determined occupational pension (ITPK). If you have another solution for occupational pension, it is up to you as an employer to agree with the employee on how the deposit for the flexible pensions should be made. These arrangements are occasionally also made between the employer and the local union trade.
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