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Sunday 21 July 2019

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Swedish pension pots could drop by more than SEK 1m in a recession

Written by Sunniva Kolostyak
12/04/2019

Swedish pension savers could see their pensions reduced by more than SEK 1m (€114,494) if a strong recession hits, a study by pensions provider Skandia has found.

According to Skandia, savers need to increase their pension savings by several thousand SEK every month to cover themselves in case of a recession.

The report has assessed how different scenarios could impact pensions in the future. A milder economic crisis hitting in 2020 could reduce pension capital by between SEK 410,000 and SEK 650,000. A deeper financial crisis, Skandia said – similar to the one in the 1990s – can reduce capital by between SEK 760,000 and SEK 1.2m, depending on occupation.

Skandia pensions economist Mattias Munter said: “Tomorrow's pensioners will be affected more than before by developments on the stock exchanges. As occupational pensions and personal savings become more important, future economic crises become increasingly important factors for the Swedes' pension savings.”

“It is clearly difficult to say exactly when an economic downturn will hit or how deep it will be. What we certainly know is that one or more economic crises occur during a person's working life, historically.”

He explained that to protect the pensions savings against a crisis, it is important to start saving early in life. Saving between SEK 1,735 and SEK 2,835 every month could be enough to cover a recession next year.

Furthermore, choosing an “all-weather” portfolio could be a smart way to prepare for worse times, Munter pointed out.

“It is very difficult to predict ups and downs in the stock market. Savings with guarantees, such as traditional capital insurance, evens out fluctuations over time and are often a very good base for long-term pension savings.”



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