Pensioners amongst the winners in Sweden’s Budget 2021

Pensioners in Sweden are set for pension increases and lower income tax following the Swedish government’s Budget 2021.

Publishing its Budget Statement, the government said: “Everyone who has taken part in building our country is entitled to security in their old age.” As part of this, the government is removing the remaining difference between the taxation of pensions and earned income.

“This difference will be eliminated as of 1 January 2023. Pensions will be raised through a new pension supplement, targeting those who worked for a long time yet still have a low pension,” the government stated.

The reduction in tax is set to cost the government SEK 2.36bn each year for the next three years, according to its reform costs document.

In addition, it said pension-related age limits will be adjusted to maintain pension levels as people live longer lives. Furthermore, the age limits for the right to sickness benefit, sickness compensation, unemployment benefit and compensation from other security systems will be adjusted in line with the pensionable age.

These reforms are part of a wider package to support the Swedish economy in the wake of the coronavirus pandemic. The government has proposed extensive fiscal policy stimulus measures and reforms worth more than SEK 105bn for 2021 and more than SEK 85bn for 2022.

Commenting on the pension reforms, Länsförsäkringar personal economist, Emma Persson, said: “The government wants to raise pensions for those who have low pensions, the majority of whom are women. This is done through a so-called income pension supplement that gives those who have a pension between SEK 9,000 and 17,000 another SEK 600 more per month.”

In addition, she noted that the government has had the desire to equalise taxes for those who have retired for a while.

“To take the last step in that equalization, just like last year, the basic deduction is raised. This means a tax reduction for those who have a pension of SEK 21,000 of approximately SEK 800 more per year,” Persson stated.

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