A recession in Sweden could cost individual pension savers as much as SEK1.2m (€115,000) each in terms of future pension capital, according to research by pension provider Skandia.

The figure comes from a detailed study examining the possible effects of a Swedish recession – similar to the one that hit the country in the early 1990s – on pension savings. Skandia said the study was the first of its kind.

Mattias Munter, pension economist at Skandia, said: “Tomorrow’s pensioners will be affected more than previously by developments on the stock exchanges. As the occupational pensions and personal savings become more important, coming economic crises also become a major factor for the Swedes’ pension savings.”

Skandia said that customers would need to save between SEK1,735 and SEK2,835 a month extra to compensate for such an economic downturn, depending on their salary level.

The study examined the effects of three different potential economic crises: one in 2020, resulting in no capital increase for two years; a more serious recession next year with no increase for four years; and a serious crisis hitting in 2030 resulting in no increase for four years.

The firm applied these scenarios to four professions in different salary categories, including an assistant nurse, a painter, a senior high-school teacher and a software and systems developer.

The results showed that the most serious recession scenario, in 2030, would mean that the highest earner – the software and systems developer – would have to save an extra SEK1.24m to fully compensate for losses on their savings.

Munter warned, however, that the future remained completely unpredictable: “Reality is much more uncertain than forecasts. It is clearly difficult to say exactly when an economic downturn will strike or how deep it will be. What we certainly know is that historically one or more economic crises occur during a person’s working life.”

This study was based on people born in 1979, established in the labour market and assumed to retire at age 69 having had occupational pension arrangements throughout their whole working life.

Further reading

Building investor resilience in a downturn
JP Morgan Asset Management’s Sorca Kelly-Scholte explains that investors need to look at varied downturn scenarios and take new risks into consideration