Target retirement age and a higher pension age: what you need to know in HR

The Swedish pension system faces major changes ahead. And in 2026, the target retirement age will rise to 64 and 67 respectively. A change driven by the fact that we are living longer, while still retiring at roughly the same age as before.

Life expectancy has risen steadily in Sweden, while we continue to retire at 65. This means pension savings have to last for more years, which in turn leads to lower pensions. The increase in the target retirement age now taking place aims to counteract this.

The target retirement age tracks changes in life expectancy and determines the earliest age at which you can receive basic protection (in the form of a guarantee pension and housing supplement) and when you can start drawing your income pension and premium pension (three years before the target retirement age).

From 2026, the minimum age for drawing an income pension will rise to 64, and for a guarantee pension to 67. Decisions to change the target retirement age are made six years before implementation, allowing time to plan ahead and adapt. And this is not the first time the target retirement age has risen.

The effects of a higher target retirement age

We can already see the effects of the higher target retirement age: the average retirement age has risen and more people are delaying drawing their pensions. Since 2003 (when the pension system was introduced), employment among those aged 65–69 has also increased from 14% to 34%, showing that our working lives are getting longer.

At the same time, awareness of the target retirement age is low. When asked in 2023, only 8% were familiar with the term. And many mistakenly believe it is a compulsory retirement age.

Benefits for you as an employer and your employees

As an employer, your employer contributions fall from 31,42% to 10,21% when an employee reaches the target retirement age. Since you only need to pay the old-age pension contribution, employing older staff becomes considerably cheaper.

There are also benefits for individuals who work beyond the target retirement age, as they receive a higher earned income tax credit and basic tax allowance. This leaves them with more money in their pocket.

A higher retirement age does not, of course, just mean lower costs for you as an employer. It also allows you to retain experienced staff and their expertise, which can reduce recruitment costs and improve continuity in business-critical roles. Something that is particularly important if you work in an industry with a skills shortage.

Reliable administration provides peace of mind and flexibility

If you are unsure about managing your employees’ occupational pensions, we at FörsäkringsGirot are here to help. With over 30 years of experience, we now help over 200 clients safeguard their employees’ occupational pensions. Contact us to find out how we at FörsäkringsGirot can help you simplify and streamline your administration, saving time and ensuring your employees receive the correct benefits.