How your pension is worked out

All your working life you build up pension capital in the public pension. When you start drawing the pension, that capital is divided by a divisor to give a yearly amount: pension per year = capital divided by the divisor. The divisor sits roughly around the number of years you are expected to live after you start drawing, adjusted a little. A capital of 2,000,000 kr and a divisor of 16 gives 125,000 kr a year, a little over 10,000 kr a month.

Life expectancy and the growth norm

Two things set the divisor. One is the expected remaining life expectancy for your birth cohort at the age you draw the pension: more expected years, a higher number. The other is a growth norm of 1.6% for the income pension. The system credits a future uprating of 1.6% in advance, which lowers the divisor slightly and makes the starting pension a touch higher. The pension is then recalculated each year according to how the income index actually develops.

Different for income and premium pension

The income pension and the premium pension each have their own divisor, because they rest on different assumptions. The income pension uses the 1.6% growth norm. The premium pension is paid out from the actual value of your funds and uses its own divisor, recalculated each year according to how the funds perform. That is why the two parts of your public pension can move differently from year to year.

Wait a year, get more every month

This is the single biggest lever on your pension. Draw it early and the capital is expected to last many years, so the divisor is high and the monthly amount low. Wait and the number falls. With a capital of 2,000,000 kr: drawing at 65 with a divisor of about 17.5 gives around 9,500 kr a month, but at 67 with about 16.0 it becomes around 10,400 kr, nearly ten percent more, and by then you have also had time to save up more capital.

Younger cohorts get a higher number

Because we live ever longer, younger cohorts get a higher divisor at the same drawing age, which means a lower monthly pension for the same capital. That is precisely why the target retirement age keeps rising: it is meant to keep the number of pension years roughly constant even as life expectancy grows. Pensionsmyndigheten sets the divisor for each cohort; the numbers here are rounded reference values to show the pattern.

Calculate further

• Public pension calculator: what your pension builds up to
• Withdrawal calculator: how long your money lasts
• Guide: drawing your pension, the order and the timing

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