Entrepreneurs Second-class Citizens
Poverty in retirement among the self-employed is very common in Sweden.
“The unemployed are encouraged to start businesses. Many cannot afford to pay themselves a salary,” explains Mats Eriksson, experienced restaurateur.
In Sweden, the self-employed accrue pension through a social security contribution paid in connection with taxation. No salary, no social security.
The pension of Swedish entrepreneurs is only 80% of that of wage-earners. Women and immigrants get even less.
“In addition to small and irregular income, entrepreneurs do not get an occupational pension, a life insurance and an occupational accident insurance paid for by the employer,” explains Gabriella Sjögren Lindquist of the Swedish Social Insurance Inspectorate. These benefits are crucial for a person’s social security.
The Swedish guaranteed pension acts as a lifeline. For single persons, it amounts to EUR 840/month and for married persons EUR 750. This high amount may not motivate all entrepreneurs to pay for an earnings-related pension, Lindquist argues, as their earnings-related pension is unlikely to exceed the limit of EUR 1,230 after which no guaranteed pension is paid.
Entrepreneurs must make up for the lack of an occupational pension. “They should place circa 4.5% of their income in voluntary pension savings,” explains Monica Petersson of the Swedish Pensions Agency.
Petersson is well aware that many Swedes do not know how to save. She argues that economic skills should be taught at school. Lindquist agrees.
“Swedes are too casual about risks. They think that society will take care of them if they run into trouble.”
Retirees Get the Most in Return
The internal rate of return on pension contributions for people born in 1940 is nearly three times as high as that of people born in 1970 or later. Yet all generations will receive more in pension than they have paid in contributions.
”The already retired will receive the best internal rate of return. For those born in 1940, it will be 6.5% and 2.3% for those born in the 1970s”, says Ismo Risku, Head of Department at the Finnish Centre for Pensions.
The intergenerational gap is mainly caused by the lower earnings-related pension contributions in the past.
Women, who live longer than men, will have a higher internal rate of return. ”However, since women earn less than men, they will receive smaller pensions.”
The figures stem from projections made at the Finnish Centre for Pensions.
Gender (In)equality in Retirement Income
Women’s income is 60-100 per cent of men’s, depending on how income is defined and what the structure of the family is.
In 2013, the earnings-related pension of single female retirees was EUR 12,300 (EUR 13,400 for female retirees with a family).
When taking surviving spouse’s pensions into account, the income of single female retirees was EUR 2,000 higher than that of female retirees with a family.
When measuring in terms of the equivalent income (a method that aims at making the income of different types of households comparable), the income of single female retirees was EUR 9,200 lower than that of female retirees with a family.
The income of single male retirees was smaller than that of male retirees with a family, regardless of how income is defined. When measuring in terms of the equivalent income, the gap between the annual income of single male retirees and those with a family was nearly EUR 6,000.
Managing Working Capacity Risks
The Workability Management service offered by Varma Mutual Pension Insurance Company is a unique set of tools used to measure and monitor working capacity at workplaces.
Katriina Lehtonen, HR Director at Parma Oy (concrete construction) says the service has improved the company’s working climate and the employee’s working capacity. In addition, the number of sick leave days has gone down. As a result, the company’s pension contribution costs have been reduced:
“We reacted to the increasing volume and cost of sick leave days in our company,” Lehtonen says. “Working capacity issues became an active part of our business strategy. It has paid off. With Varma’s help, our expenses have gone down considerably as our experience-rated disability contribution expenditure has been heavily reduced.”
Outi Hartikainen, Development Manager at Varma, points out that all parties involved work for the same goal: employees who can retire in good health.
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