Sweden’s two biggest occupational pension providers have separately announced changes to benefits and contribution levels that favour customers as the twin factors of the pandemic and rising interest rates make pensions cheaper to provide.

Alecta – the country’s largest pension fund with SEK1.15trn (€115bn) in assets – announced this morning, alongside an inflation-linked annual uplift in pensions, that it was reducing defined benefit (DB) premiums for its company customers by 30% for 2022 because of its strong funding level.

This follows news from AMF yesterday that it is making an extra distribution this month of SEK1.3bn to its 1.6 million customers within the blue-collar SAF-LO occupational pension scheme.

Roland Kristen, chief actuary of AMF, said: “AMF is run according to mutual principles, which means that all profits we make over time must go back to our savers.

“Unfortunately, the COVID-19 pandemic has meant that our SAF-LO customers have lived shorter than our assumptions, which means that a so-called inheritance gain arises,” he said.

This inheritance profit had to be distributed fairly to the customers who shared the risk, Kristen said.

The distribution will go to savers with traditional insurance without repayment protection born between 1930 and 1979, AMF said.

Older customers would receive around SEK2,000 more in inheritance gains during the month of November, it said, while younger customers would get a slightly smaller windfall.

As for Alecta, the firm announced today that its board had decided to increase DB pensions in its ITP plan by 2.51% for 2022, in line with inflation in the past year.

It went on to say that it had been increasing premiums in the ITP 2 pension scheme since 2011 because of lower market interest rates and increased longevity.

These premium increases had applied to new subscriptions and benefit increases, and together with good returns, had significantly strengthened the firm’s financial position, Alecta said.

Fredrik Palm, product manager at Alecta, said funding on this DB side of the business was 169% on 30 September – above the 150% level required to premiums, according to company policy.

Asked about the role rising interest rates and falling bond prices had played in the reduction in premiums, Palm told IPE the reduced premiums were partly due to rising rates this year, which had increased Alecta’s funding level.

“It’s a combination of firstly, a good return on our asset side, and secondly, increasing interest rates that reduce the net present value of our liabilities,” he said.

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