Sweden’s AP7 has highlighted the risks of taking an occupational pension as a fixed-term withdrawal.

In a blog post, AP7 digital editor, Maria Schultz, referenced a previous survey by Sifo and Swedbank that shows more than half of Swedes over the age of 55 choose to draw their occupational pension for a limited period rather than for life.

A fixed-term withdrawal results in a higher monthly amount initially but when the term ends a person’s income will decrease significantly. Occupational pensions can be drawn for life or for a few years whereas the public pension that comes from the state, such as the premium pension, is paid for life.

“A fixed-term withdrawal provides a higher monthly amount, but once those years have passed, the occupational pension is gone. With lifelong withdrawal, the monthly amount is lower but is paid for life," Swedbank personal finance expert, Madelén Falkenhäll, said.

In addition, various tax effects can exacerbate an already difficult situation, Schultz wrote. For example, a person over 65 that has an income of more than SEK 52 000 per month, must pay state income tax. This means an additional 20 per cent on the part of the income that exceeds SEK 52,000.

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