Swedish pension company Alecta has announced that its board has decided on a premium reduction for defined benefit (DB) retirement and family pensions of 30 per cent, and an increase to DB pensions of 6.48 per cent, for 2024.

The premium reductions on risk premiums and savings premiums total around SEK 6.4bn, alongside reduced costs for firms of a further SEK 1.9bn due to the enumeration of accrued pension rights.

Therefore, in total, the premium reductions will decrease companies’ DB pension costs by SEK 8.3bn in 2024, according to Alecta, corresponding to around 1.5 per cent of the ITP companies’ total payroll over the year.

Due to lower interest rates and increased longevity, Alecta gradually reduced the premiums in an ITP 2 between 2011 and 2020.

For 2022, a premium reduction of 30 per cent was introduced, which was raised to 40 per cent for 2023.

Alecta stated that it was able to continue its premium reductions due to its positive return in 2023 and as continued interest rate increases have led to the level of consolidation rising.

“By Alecta continuing with significant premium reductions, we are helping Sweden's companies to lower their pension costs,” commented Alecta product manager, Fredrik Palm.

“We are a company owned by our customers and this is a clear example of the stability and long-term strength of our mutual model.

“Alecta's financial position is very strong. The consolidation level on 30 September 2023 amounted to 178 per cent and thus exceeds by a good margin the level of 150 per cent which, according to Alecta's consolidation policy, is required to be able to provide premium reductions.”

Alongside this, Alecta has announced that it will increase DB pensions by 6.48 per cent for 2024, corresponding to the inflation figure of the past year.

This will result in SEK 34bn being distributed to 1.6 million Alecta DB occupational pension ITP 2 customers, with the decision applying to pensions under payment and accrued pensions that have not yet begun to be paid out.

“The increase of 6.5 per cent means on average around SEK 300 per month for a pensioner who worked as a civil servant in the private sector during their professional life,” said Alecta pension economist, Staffan Ström.

“Alecta is owned by all our customers and lets all the surplus go back to them.”

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