Johan Sjostrom Marketing Director, KPA PENSION (SWEDEN) Friday,

First and Second Pillar Pensions in Sweden Conference on Pensions, September 2013, Hydra Ev datum

State pension (I pillar): Based on income 18.5% on ones income is set aside Income pension (16 percentage points) Pay-as-you-go, notional defined contribution Premium pension (2.5 percentage points), individual choice of funds Guaranteed pension (minimum level) EUR (2013) is the ceiling for accruing pensions rights Occupational pension (II pillar): Nation-wide collectively negotiated agreements Covering appr. 90 % of the workforce Paid by employer, DC, individual choice The Swedish pension system

1994 Parliament adopts principles of the new pension plan 1991 Commission set up 1992 Draft of a new pension plan 1998 Main legislation of the new pension plan 2001 Legislation on the automatic balance mechanism But transition quick i international comparison 2003 first payments according to new system Social democratic government Center-right government Pension reform process - very long Social democratic government

Civil servants Local & regional govern. empl. Private white color Private blue color Swedish pension market, payments ATP old old-age pensionplan Inkomstpension (new) Premium pension (new) Guaranteed pen Survivors pen % 15% 10% Occupa- tional Public Private Percent of GDPMarket share 0.0

Second pillar - four main collective agreements White collar Blue collar Private sector employeesPublic sector employees State Municipals and Regions

Second pillar pensions – contributions/repl.rates Collective agreementDC (contributions and income ceilings) DB Private sector, Blue collar 4,5 % < EUR 30 % > EUR Private sector, White collar 4,5 % < EUR 30 % > EUR EUR State sector4,5% < EURAppr. 60 % replacement > EUR Municipals and regions4,5% < EUR 30% > EUR < 1985 DB > EUR

Swedish market – second pillar pensions

Market volumes, life insurance

Where can Mr Svensson invest his second pillar pension?

Whats the status of my pension?

The orange envelope Started in 1999 Distributed each year to citizens born in 1938 and later –Pensionable income > EUR Distribution: –January to March 6,2 Million envelopes each year (population 9,3 Million)

Projections made in the orange envelope Age of retirement0 % growth 61 year 65 year 70 year

Does Mr Svensson read his orange envelope?

Does Mr Svensson understand the orange envelope?

Implemented in ,8 million users (2012) A joint initiative by the State and the Insurance Industry I, II and III pillar pensions A tool for individual forecasts

Pension forecasts from different sources Orange envelope Yearly statement & projections I pillar Green envelope Yearly statement & projections II pillar My pension Forecasts on-demand I, II and III pillar

Initiatives in the near future Increasing minimum pension age –Currently at 61 year in first pillar –Currently at 55 year (DC) and 61 year (DB) in second pillar Premium Pension in first pillar? –Funded or not funded? –Number of funds? Tax incentives for third pillar pensions? –To be or not to be? Financial literacy –How can Mr Svensson be more financial literate?

Thank you for your attention!