Pension replacement rates for newly retired pensioners in Sweden have increased to around 70 per cent, as higher retirement ages begin to feed through into improved pension outcomes, according to analysis from the Swedish Pensions Agency (SPA).

The findings, published in two reports, showed that the replacement rate – which measures pension income as a proportion of pre-retirement earnings – had risen notably for recent retirees.

For middle-income earners retiring in 2024, total pension income, including occupational pensions, reached around 70 per cent of final salary, representing an increase of six percentage points compared to 2022.

Breaking this down, men received a replacement rate of 73 per cent, while women received 68 per cent, highlighting a persistent gender gap in retirement outcomes.

Across all newly retired individuals aged 63 to 70, the median replacement rate stood at 73 per cent, further underlining the improvement in pension adequacy.

The SPA attributed the increase primarily to recent policy changes, which raised the minimum age for drawing income and premium pensions from 62 to 63, and the eligibility age for the guarantee pension from 65 to 66.

These reforms have encouraged individuals to delay retirement, resulting in higher accrued pensions and shorter payout periods, both of which contribute to higher replacement rates.

Meanwhile, the reports also showed that replacement rates varied significantly depending on income levels.

Low-income earners typically recorded higher replacement rates – in some cases exceeding 100 per cent – largely due to the impact of the guarantee pension, rather than higher absolute pension income.

Conversely, high-income earners tended to have lower replacement rates, although they still received higher pensions in monetary terms.

The SPA noted that occupational pensions played a key role in maintaining relatively stable replacement rates across income groups, particularly for middle- and higher-income earners, helping to offset caps in the public pension system.

Looking ahead, the agency expected replacement rates to increase further following the introduction of a new 'target age' this year, which will raise the earliest age at which pensions can be drawn.

However, it cautioned that a higher replacement rate did not necessarily equate to a higher standard of living in retirement, particularly for lower-income groups, where higher ratios often reflected lower pre-retirement earnings.

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