Rising pension costs due to increasing inflation in Sweden’s municipalities are “worrying” and they will be “significantly higher” in 2023 and 2024, KPA Pension has said.

KPA Pension described rising inflation as the municipal sector’s worst enemy when it comes to pension costs.

Following visits to municipalities and regions to review updated pension forecasts, KPA Pension head of the Pension Economics Unit, Sven Lannhard, said the atmosphere was one of shock and very quiet, and that people were “dumbfounded”.

He gave examples from his visits, including one municipality where the costs for 2023 have been calculated to increase year-on-year from SEK 360m to SEK 540m.

Furthermore, in one region, the forecast has gone up from SEK 750m to SEK 1,150m.

Forecasts from December 2021 assumed inflation would end up at around 2 per cent.

However, the price base amount, which is crucial for occupational pensions, was written up in the summer by 8.7 per cent based on how much inflation had increased.

In October, it was estimated that the sector’s pension costs would increase by SEK 45bn in 2023 and a further SEK 13bn in 2024.

Around a fifth of the increase in 2023 is expected to come from the AKAP-KR agreement, while the rest is due to inflation.

“If we overcome inflation, then the costs will go down,” commented Lannhard.

“But 2022 shows that it can also go the other way. It is important to take account of increased risks and more buffer may be needed.”

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