Sweden has reduced taxes for pensioners and employees over the age of 65.

The tax reduction this year is as a result of the basic deduction being increased for those who turn 66 during the year. A tax reduction for earned income will also be introduced in 2021.

This means that those with salaries and social insurance, including pensions, will receive a tax reduction. The tax reduction is lower for low incomes and is escalated with higher incomes until the maximum level of SEK 1,500 is reached.

The Swedish Pensions Agency has published a report on pensions and taxes for 2021 and has also produced calculations on the effect of tax on pensions and salaries for those who continue to work after the age of 65. It found that delaying retirement is beneficial for several reasons, including the obvious that those who work longer will continue to build up more pension rights.

Individuals that continue to work also receive a more favourable tax deduction on their pension if they wait to withdraw it from the January of the year they turn 66 in. From the year a person turns 66, income tax on salary is also lower. The Swedish Pensions Agency said another advantage is that time spent working with a salary usually means having a higher income than if they were to be living on just a pension.

“From the year you turn 66, and on income up to SEK 437,000, you can actually say that the tax is negative. You then pay less in tax on your salary than the pension right you receive on the same income,” Swedish Pensions Agency analyst, Stefan Granbom, said.

In addition, Swedish Pensions Agency analyst, Hannes Nilsson, said that few people know how much more money you get from working later in life.

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