A salary exchange plan means that you as an employee give up some of your salary today for extra provisions for your pension. It means that you invest part of your gross salary in an occupational pension scheme and pay income tax only when you start to receive payouts from your pension. The basic requirement for it to be beneficial to sacrifice some of your salary is that you earn more than 8.07 income base amounts (IBB)/year (SEK 572 970 or SEK 47 748/month for 2022).
Potential benefits of a salary exchange plan:
- Lower income tax on the sacrificed amount: Many people have a lower taxable income during their retirement, which may result in lower income tax on the sacrificed amount compared to a salary paid today.
- Extra allocations from the employer: When there is a salary exchange plan, the employer will have lower costs for your salary. Instead of employer’s contributions, a special payroll tax is payable. The difference varies but is normally approx.: 5-6 %, a difference that can be given as an additional allocation to your savings.
Example: An allocation of 6 % means that a salary exchange of SEK 2000 becomes SEK 2120 in savings. A difference that can have a big impact over time when the amount grows with compound interest effects.
(NB: Not all employers give this allocation, which is important to consider before any decision on salary exchange is made)
- A lower yield tax: A salary exchange occurs in an occupational pension insurance which means significantly lower tax than an ISK (Investment Savings Account), endowment insurance or securities custody account.
Example: In 2020, the flat-rate tax is for example 0.375 % in an ISK and the yield tax for pension insurance is 0.075 %, i.e.1/5 the size.
- Earmarked money: The money is dedicated to the pension as they can be withdrawn no earlier than from the age of 55 and for a minimum of 5 years (which for some people is an advantage while others see it as a limitation).
Potential disadvantages of a salary exchange plan:
- Possible impact on the national pension: Salary exchange below 8.07 IBB has a negative impact on the general pension (and if even lower, also on sickness and parental benefits).
- Earmarked money: In the event that it would be needed before retirement, the money is not available but locked until the age of 55 and can as a minimum be paid out for 5 years.
If your employer offers you a salary exchange plan, you can submit an application in advinans.se. In the application flow you can see the effect on your gross and net salary (based on a standard municipal tax rate of 30%). The application is signed with BankID and then your employer approves the application. Once you have signed and the employer has signed, an agreement on salary exchange is generated which is saved with Advinans and can be printed.
Remember to register your desired salary exchange well in advance. If your employer approves your application for salary exchange no later than the last day of the month, it will become active from the following month.
If your employer offers you the possibility to make a salary exchange, you apply for this via the menu “Pension” and the tab “Salary Exchange”. The pension forecast will help you decide the amount that is needed to reach your target pension.
By following these simple steps you can make an application for salary exchange:
- Log in to advinans.se.
- Go to "Pension" and "Salary exchange".
- Choose "Apply for salary change".
- Specify the gross salary deduction you are going to make. This shows the monthly savings that are paid extra for an occupational pension and the effect on your salary after tax.
- Choose how your savings are to be placed.
- Confirm or change your financial profile.
- Sign the application with BankID. When this is done, your employer will receive a notification and can approve your application for a salary exchange.