The pension liabilities of Swedish municipalities and regions increased by more than SEK 42bn in the 2022/23 financial year, according to a report by Skandia.

At the end of the financial year 2023, total pension liabilities of Swedish local governments amounted to over SEK 543bn. This means a pension debt per inhabitant of over SEK 50,000, which the next generation will have to help pay for, Skandia said.

In its report, Skandia also detailed how Swedish municipalities have hidden pension liabilities off the balance sheet amounting to almost SEK 300bn. It said this “significant item” hidden in local government accounts, is equivalent to almost 30 per cent of Sweden’s total national debt.

“For last year, we clearly see the inflationary shock in the pension liabilities of municipalities and regions. Municipalities and regions are paying dearly for their pension obligations, with the overall financial cost of the pension debt approaching 10 per cent. A cost that cannot be paid but increases the pension liability and is postponed to the future," Skandia head of public sector, Greger Gustafson, said.

Without clear financing plans, municipalities and regions risk getting into financial difficulties, Skandia said. Moreover, the report added that many municipalities and regions lack matching assets or clear and sufficient financial plans to finance their pension liabilities. These are liabilities that will have to be managed in local government finances for more than 50 years.

“In our analyses, we can see that almost every second municipality has had a negative population trend over the past 40 years. This means that many municipalities have an increasing proportion of older people and fewer people of working age. This makes the challenge even greater, as fewer people can contribute to pension liabilities," Gustafson said.

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