The purchasing power of new retirees turning 67 has not increased for the first time since 2018, primarily due to the high inflation experienced in 2022 and 2023, research from Swedish pension company Alecta has revealed.

Since the first study, which analysed declared income from all Swedes over 55, in 2018, a “clear” trend has emerged – older people’s incomes have increased with each cohort that has retired.

However, this year’s study, which was focused on income during the inflationary years of 2022 and 2023, revealed that the trend of increased income with each retired cohort has come to a "halt".

The study compared income at the age of 60 (when most people work) with income at 67 (when the vast majority have retired), which in 2023, the 67-year-old average income earner had an income equivalent to 87 per cent of their income at 60, after tax.

The corresponding figure for high-income earners was 88 per cent and for low-income earners 115 per cent.

Meanwhile, for those who turned 67 in 2021, the figure was 90 per cent for the middle-income earner, 90 per cent for the high-income earner and 116 per cent for the low-income earner.

Commenting on the figures, Alecta pension economist, Staffan Ström, said: "This is the first time we can state that purchasing power has not continued to increase for each cohort that turns 67.

“This is a break in the trend and a result of the high inflation in 2022 and 2023. Income has increased in kronor and öre during these years, but the high inflation simply ate up the increase.

“Overall, however, we see that the purchasing power of older Swedes is holding up quite well.”

The study also showed a large dispersion in income. For those born in 1956, at age 67, a low-income individual receives 115 per cent of their income from when they were 60, totalling about SEK 18,500 a month after taxes.

In comparison, a person with an average income of 67 has 87 per cent of their income from age 60, which amounts to around SEK 22,600 a month after taxes.

Meanwhile, someone with a high income at age 67 gets 88 per cent of their income from when they were 60, resulting in about SEK 48,700 a month to live on.

"A 15 per cent increase in income for low-income earners looks really good on paper, but we have to remember that they are rising from low levels,” Ström explained.

“For this group, the public pension at the age of 67 accounts for a majority of the income, but the occupational pension also accounts for a significant part. Quite a few have income from work, private savings or benefits.”

The research also highlighted that despite all age groups being affected by the high inflation in 2022-2023, 50-year-olds were hit hardest during the years of inflation.
 
From 2021 to 2023, it decreased by an average of 11 per cent, or just over SEK 2,000 per month, for middle-income earners born between 1951 and 1960.

Alecta said that it was not only due to inflation that the impact on the purchasing power of people in their 50s decreased more than in other age groups, but also due to many people in the age group retiring or scaling back their work, naturally resulting in a lower income.

The company also stated that some people started to take their pension early and had to pay higher taxes, while those who continued to work often received lower salary increases as a percentage than younger colleagues.

For people in their 60s and 70s, purchasing power typically decreased by 6–7 per cent, or SEK 1,600-2,000 a month, with the inflationary effect, to some extent, dampened by wage increases.

Additionally, the research showed that the purchasing power of 40-year-olds decreased by a few per cent, a couple of hundred kronor a month.

Alecta said that increases in the income index and the basic deduction for pensioners helped to dampen the inflation effect.

Purchasing power refers to the amount of products and services available for purchase with a certain currency unit.

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