The pension arrangements for Sweden’s MPs are set for radical change as a result of a review that is due to report by the end of this year. The present period of 12 years to qualify for a full pension, undoubtedly the system’s most distinguishing feature, is likely to be swept away as MPs’ pensions are brought back into line with those of other senior public employees in Sweden which underwent similar reform last year.
As pensions for the population as a whole move from 30 years to lifetime earnings it was bound to become ever more difficult for MPs to retain their 12-year rule. But deciding on an appropriate basis for the pension has proved anything but clear-cut, and the matter has attracted much debate.
Currently there are 349 members of the Swedish parliament, and each earns a monthly salary of SEK45,000 (E4,934). This is lower than the salaries paid to MPs in several other countries, in spite of a relatively high cost of living. The remuneration of MPs, both the salary and pension, is based on that of senior public servants. The prime minister and speaker of the house each receive SEK106,000 a month.
The pension is pay as you go. The method for calculation is not straightforward: it consists of 11.5% of the part of the salary up to SEK295,000, 65% of amounts above that and up to SEK780,000, and 32% of amounts above that and up to SEK1170,000. The rate of accumulation is uniform.
The full pension works out at just over SEK16,000 a month, much lower than the pension paid in many other European countries. However, it should be noted that it is almost matched by a maximum entitlement from Sweden's generous social security system, given sufficient years of employment in each case.
The pension, which is taxed as income, can be drawn from the age of 65 but not before cessation of parliamentary service. It is adjusted in line with the retail price index, which sets it apart from many parliamentary schemes elsewhere in Europe that adjust the pension in line with increases in salary, and are more generous as a result.
In order to be eligible for a pension an MP must serve for a minimum of six years, which compares with an average mandate of an estimated eight years. Eligibility also depends on an MP being at least 50 on leaving parliament. However, the parliamentary pension is not limited by pension rights accumulated except where the MP has served in the government.
As a result of these rather stringent requirements only around 60% of former members receive a pension. The remainder have to make do with a far less generous annuity, for which they must have served a minimum of three years. The period for calculation of the annuity is 30 years rather than 12, although otherwise the calculation is similar. If a member retired at the age of 48 having served 12 years he would receive an annuity of just under SEK5,000 a month.
There are 381 MPs drawing a pension, and 100 former MPs with deferred pension rights. There are also 145 spouses (including common-law spouses) receiving a survivor’s pension. Last year around SEK40m was paid out in pensions compared with SEK35m a year earlier.
Another distinguishing feature of an MP’s remuneration package is the system of guaranteed income for MPs who lose their mandate before the age of 65 which covers the period until they find work. To be eligible an MP must have served for at least three years.
For the first year the guaranteed income amounts to 80% of salary; for the period after the first year it depends on time served as an MP, and ranges from 33% for six years’ service to 66% for 12 years. Entitlement continues to the age of 65 if the MP is more than 50 years old at the time of leaving parliament; those that leave between the ages of 40 and 50 have five years’ entitlement; those that leave before the age of 40 receive up to two years’ benefit.
Responsibility for setting remuneration sits with the Remuneration Committee. It has three members including the chairman; all are appointed by the board of the Riksdag. It is a principle of the system’s impartiality that the committee members should not be former MPs. Any decision on pensions and the guaranteed income is always submitted to a parliamentary vote, although the issue of salaries is always decided by the committee alone.
As elsewhere the subject of remuneration for MPs has come in for considerable scrutiny in Sweden. Joakim Palme, adjunct professor of sociology at the University of Stockholm and son of former prime minister Olaf Palme, believes that some of the comment, notably by the Swedish daily Aftonbladet, is exaggerated. “I think it is appalling that they the_press are mobilising against the politicians in big, bold type, encouraging their readers to petition against the MPs’ pension arrangements. If you look at the figures they are not that high.”
Carl-Axel Petri, chairman of the remuneration committee, describes the public sentiment: “They will live as we live.”
He comments: “This is a problem. We must have a balance: we need a system that the public can accept, but we also need to attract good competent people to parliament.”
The remuneration package for MPs is subject to review every five to seven years. Last year the pension arrangements for senior public servants were changed, whereby the length of time required to accumulate a full pension was increased from 12 to 30 years. The change was made due to pressure from the public following changes made to the general pension system. This has brought about the present review of the MPs’ pensions which are likely to undergo a similar change, although this would only affect new members.
But is it appropriate for MPs’ pension arrangements to mirror those of senior public servants? Should MPs’ pensions be brought into line with lifetime earnings, defined contribution (DC)-based system of the population as a whole? Or should special dispensation be made to account for the peculiarities of the job? After all, as the average mandate is just eight years, what is the bearing on reality of a likely change in the basis for calculation of the full pension to 30 years?
In answer to these questions, Petri says: “We have not made a connection. People should earn pension rights from other employment as well. MPs are normally 35 to 40 years old when they enter parliament by which time they have earned 15 years’ pension rights. And if they lose their mandate they have the income guarantee.”
Palme considers as inappropriate the present method of calculating the parliamentary pension. “You get a full pension after 12 years, regardless of how long you are an MP, so if you continue to work hard in the parliament for years after that it will not affect your pension. The 12-year rule is only relevant if your ambition is to earn your pension in a short period and lie back after that.”
The move from 12 to 30 years seems rather drastic, and would appear to represent a severe cutback in the benefits for MPs. But Palme explains that it would be a cutback only if the pension remains as a defined benefit (DB). He proposes a much more radical departure from the present system than a possible change of the basis for calculation to 30 years.
He believes that if MPs’ pensions should be reformed in the same way as the Swedish social insurance system where the DB system is replaced with a DC formula and the basis for calculation becomes the full working life.
“It is important that we don't reduce spending on the parliamentary pension but redesign it in coherence with what is applied in the general social insurance system, replacing the present defined benefit system with a defined contribution system based on lifetime earnings,” he says. “So those who are successful in their political careers would get a higher pension; those with a short record in parliament would lose out, but even they would get a good top-up pension, which would be an attractive component of the benefits package.”
He adds: “If they tell the Swedish people this principle applies to the general system then I think they should apply it to themselves. I have been waiting since the general system was reformed in 1994 and 1998 for the parliamentarians to do something about their own pensions. Parliamentarians have always followed public servants in their remuneration; now have a chance to take the lead.”
The guaranteed income also forms part of the present review, and here too it may be that a fresh approach is needed to respond to changes in society as a whole. Palme says: “There was a time when people had lifetime employment contracts but this is not the case any more. The committee will have to look at the income guarantee and decide to what extent the situation of MPs is special.” The committee will submit its report on the pensions and guaranteed income to the board of the parliament by the end of this year. A consultation period will follow and the board aims to put its decision to a parliamentary vote next year. A move to the public servants’ 30-year rule looks the most likely outcome, unless Sweden’s MPs can take a bold step and break with tradition.

Topics