Swedish financial organisations, including the Financial Supervisory Authority (FI), have backed plans to introduce supplementary provisions for more flexible rules for payments from pension insurance, although clarity may be needed in some areas.

The Swedish government recently consulted on plans designed to counteract certain problems with determining the size of payments during the first five payment years, which it acknowledged could risk worsening the situation for policyholders.

Currently, payments from a pension insurance policy must be made in the same or increasing amount during the first five payment years (the five-year rule).

The thinking behind this rule being that these savings are for retirement and that payments from the insurance should therefore be even and lasting over time.

However, the proposals would introduce a number of exceptions to this condition, with corresponding changes also proposed for payments from pension savings accounts (IPS).

Under the changes, pensions could be paid in a lower amount than the amount paid in the immediately preceding payment if the reduction is due to changes in actuarial assumptions applied when calculating the size of the payment, the collection of fees resulting from the insurance contract or changes in the number of payments per year.

The memorandum also includes a proposal aimed at equalising the conditions for unit-linked and deposit insurance, extending the exception to the five-year rule that exists for unit-linked insurance to also apply to deposit insurance.

In its response to the plans, the FI said it was "particularly positive" to see that an increase in the number of payments per year is also set to be made possible during the first five payment years.

Swedish Insurance senior economist, Eva Erlandsson, agreed, stating: “From the perspective of policyholders, it is desirable that payments over time are reasonably even. It is therefore very positive that proposals are now being made that make this possible."

The FI also welcomed the changes to equalise unit-linked and deposit insurance, arguing that "these two types of insurance are so similar that it is justified that the same exception should apply to both".

However, the FI said that some changes may be needed to provide further clarification, suggesting, for instance, that it should be explained that the exemptions are not intended to be used to adjust the payment amounts downwards to any great extent.

In addition to this, it suggested that the impact assessment in the referred proposal should be supplemented with regard to possible negative consequences for policyholders and other persons entitled to compensation.

The FI pointed out that the government previously stated that the increased possibilities for insurance companies to reduce payments from pension insurance can at first glance be considered a deterioration for individual policyholders who receive a smaller pension payment.

However, at the same time, the government said that this effect may possibly arise in individual cases, but that the purpose of the proposal is to improve the payment profile during the first five payment years.

Given this, the FI argued that the purposes of the proposed provisions are not the same as the consequences of the proposal.

"Stating the purpose is therefore insufficient as a basis for an impact assessment," it stated, calling on the government to share a more detailed reasoning about possible negative consequences for individual persons entitled to compensation in the impact assessment.

The proposals, which apply to payments of old-age pensions and survivors' pensions from a pension insurance policy, are expected to come into force on 1 January 2026.

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