​Swedes get higher state pensions after COVID cuts life expectancy

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State pensions are likely to be slightly higher in Sweden for the next five years than they would have been without the pandemic, according to the Swedish Pensions Agency, as a result of life expectancy falling a notch last year.

The authority revealed that this impact of COVID-19 on the income pension – the main component of the general or state pension – gives pensions a lift for five years.

Erland Ekheden, chief actuary at the Swedish Pensions Agency (Pensionsmyndigheten), told IPE: “The trend for a long time has been that life expectancy increases year by year. But in 2020, life expectancy decreased, preliminarily by about 1% calculated for both men and women.”

However, the authority is still waiting for definitive figures from Statistics Sweden, he said.

For the income pension, he said the annuity divisor figure (delningstalen) is calculated according to five-year life expectancy tables from Statistics Sweden.

The divisor for those who turn 65 in 2022 will be based on data from the years 2016-2020, for 2023 in the years 2017-2021, and so on, he explained.

“So for five years, 2020 will be included in the calculation,” Ekheden said.

According to the preliminary data, life expectancy in 2020 was not lower than in 2015, but very close, he said, so the five-year average 2016-2020 will not be much lower than in 2015-2019 – but rather very close to it.

Looking ahead, Ekheden said the income pension for people who retire in 2022 will be similar to that in 2021, given a particular level of pension account savings, but still higher than if 2020 had been a year with “normal” mortality.

“The effect of the reduced life expectancy in 2020 is therefore small, I estimate that it is SEK20-SEK40 (€2-€4) more in income pension per month,” he said, adding that when Statistics Sweden releases its official statistics at the end of March, the exact size of the impact will become clear.

“The effects on the economy, which affect the income index and how much pension savings are worth, are probably greater,” he said.

In the premium pension, the smaller component of Sweden’s general pension, Ekheden said the agency used divisor figures based on a forecast of future mortality.

“And we have not changed the forecast going forward due to the pandemic,” he said.