Sweden discusses "gas rule" (pensionsgasen).

In Sweden, there is currently intense debate about the proposal to distribute surpluses from the income-based pension system (inkomstpensionen) to insured persons. The proposal was initiated by the pension group chaired by Social Affairs Minister Anna Tenje. The aim is to introduce automatic distributions of surpluses from 1 January 2027 onwards, once the system’s assets exceed its liabilities by more than 15 per cent. In this way, “unnecessarily high” reserves are to be avoided, and the funds are to benefit pensioners and contributors directly. This so-called “gas rule” (pensionsgasen) is intended to complement the existing pension brake (pensionsbromsen or balansregeln). Critics of the proposal – including the opposition Social Democrats, pension expert Mårten Pålme, and the former chief analyst of the Swedish Pensions Agency (Pensionsmyndigheten) – warn, however, that it could jeopardise the long-term stability of the pension system.

The Swedish pension system

The Swedish pension system (allmän ålderspensionen) is a universal mandatory system consisting of several components. The income-related old-age pension includes the earnings-related pension (inkomstpensionen) and the premium pension (premiepensionen). The latter is an individual, fully funded, defined-contribution pension scheme. By contrast, the earnings-related pension is financed on a pay-as-you-go basis and is supported by a large capital buffer (buffer funds). The pension system is supplemented by a tax-financed guaranteed pension (garantipensionen), as well as occupational and private pension provision.

The earnings-related pension is generally adjusted in line with wage developments. The so-called pension brake is an automatic stabilisation mechanism. It reduces or cuts pension entitlements and payments if the system's assets, which consist of pension contributions and funded reserves, are lower than its liabilities. In 2010, 2011 and 2014, this regulation resulted in automatic reductions in earnings-related pensions as a consequence of the pension brake.

Criticism of the gas rule

Minister Tenje and supporters of the reform argue that it is fair to allow current and future pensioners to share in rising surpluses. The new rule is also intended to strengthen confidence in the pension system and make it clear that politicians take responsibility in good times and bad. The gas rule will only come into effect when the system's assets exceed its liabilities by more than one per cent. This will ensure the long-term stability of the pension system.

Critics, on the other hand, point out that the existing accounting system is designed to identify deficits, but is not suitable for identifying distributable surpluses. They refer to the sharp increase in financial market volatility in recent years. A larger buffer would guarantee that pensioners continue to participate in wage developments. If these surpluses were repeatedly skimmed off, there would be a risk of constantly switching between the gas and brake rules. Critics also note that the rise in the buffer funds in the late 2010s, for example, meant that their subsequent loss in value following Russia’s invasion of Ukraine did not lead to cuts in income-related pensions. Furthermore, they emphasise that pay-as-you-go pension systems are not designed to distribute short-term accounting gains. Instead, the long-term sustainability and adequacy of the pension system must be preserved.

Parliamentary procedure

The new gas rule is to be introduced by law from 1 January 2027. The Swedish government is currently preparing a draft bill to this end. In addition, it has tasked the Swedish Pensions Agency (Pensionsmyndigheten) with preparing the introduction of the gas mechanism, so that the agency will be in a position to implement the new rule by December 2026.