The Swedish Pensions Agency (Pensionsmyndigheten) has raised its forecast for the size of the growing surplus in the country’s income pension system, estimating it reached SEK1.2trn (€115bn) at the end of 2021 – much higher than the authority’s earlier prediction.

This preliminary surplus forecast is about SEK395bn higher than the 2020 figure of just over SEK800bn.

Ole Settergren, head of analysis at the agency, said: “The surplus is significantly larger than we have forecast in previous projections. This is due to higher returns from the AP funds than expected.

“But the higher surplus is also due to the fact that pension contributions in the future are expected to be in the system for longer before they are paid out as a pension,” he added.

The pay-as-you-go income pension is the main component of Sweden’s state pension – the premium pension system of individual accounts making up the remainder.

The agency said it calculated the pension system’s assets as the present value of future contributions and the total assets held by the AP1-4 and AP6 – the buffer funds backing the income pension system.

“In total, these assets are estimated to be 12% larger than the pension liability, which corresponds to a balance sheet of 1.12 for 2023,” it said.

The agency’s calculation for its preliminary 2021 forecast includes a figure of SEK2trn for the total assets of the five AP buffer funds, compared to SEK1.7trn at the end of 2020. None of the AP Funds has yet publicly released their 2021 financial figures.

Back in December, the Swedish Pensions Agency called for a debate on what should be done with the surplus that had accrued in the state pension system since 2015, asking when and to whom the extra capital should be distributed.

With assets then exceeding liabilities at a ratio of 1.08 at that point, the agency pointed out that when the opposite was true, the practice was to reduce the size of individual pensions paid out, but in this case, no dividends were being distributed.

The Pensions Agency said today that it would publish more information on the system’s financial position in its annual report at the end of this month.

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