Insurope - Network Partner: Company Profile

our Network Partner in Sweden

SPP Livförsäkring AB

SPP is a part of the Storebrand Group

The Storebrand Group, with roots back to 1767, is a leading player in the Nordic markets for pensions, life and health insurance, banking and asset management. Storebrand acquired the Swedish life insurance and pensions provider SPP in December 2007.

SPP offers a complete range of life-insurance products for occupational and private pensions as well as asset-protection schemes available to companies, organisations and private customers. SPP's products are marketed via a network of insurance advisors, independent brokers as well as direct sales and telemarketing.

SPP also includes SPP Liv Fondf�rs�kring, SPP Liv Pensionstj�nst and SPP Konsult.

Together with Storebrand, SPP owns 75 percent of Nordben Life and Pension Insurance Co Ltd, which offers insurance solutions to the staff of multinational Nordic corporations employed abroad.

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market trend

Since most employee benefits in Sweden are regulated by collective agreements the pension plans have been offered through one selected carrier, for example: Alecta is the administrator of the ITP plan. The plans have been defined benefit pension plans, however over the last years there has been a movement towards defined contribution plans in several new collective agreements.

We see a trend where the individual chooses the insurance company and the employer pays the contributions. This has created a "tick box" market where the individuals make their choices from a list of insurance companies.

The ITP plan for the white-collar workers is a non-poolable plan, but if earning more than 10 base amounts (SEK 445,000 in 2006) there is a possibility to opt out of the plan with the employers' consent. The risk parts in these "opt out solutions" could be pooled. Lately we have seen a trend where the employers create their own premium plan for the "opt out solutions". This makes it possible to cut free from the cost neutrality of the traditional ITP plan and have more of a defined contribution plan approach.

When there is a large number of employees earning more than 10 base amounts it could be possible to split the risk and the savings for the "opt out solutions". By placing the risk parts of the insurance with one carrier it is possible to pool all the risk premiums and still let the employees have different carriers to choose between for the retirement premiums. In cases like this SPP offers a tool called "Benefit World" which simplifies the administration for the employer. "Benefit World" also helps the employees with advises when deciding how to invest their retirement premiums. This is done over the companies Intranet.

typical benefit plan

The new ITP Plan

New Pension agreement for private sector salaried employees

The Council for Negotiation and CO-operation (PTK) and the Confederation of Swedish Enterprise (Svenskt Näringsliv) have reached an agreement on a new supplementary pension (ITP) plan, due to come into effect on 1 July 2007.

The agreement gives all salaried employees in the private sector born in 1979 or later the right to a defined-contribution pension. Private sector salaried employees born in 1978 or earlier who are covered by the current defined benefit ITP plan will continue to be so.

However, employers who register with the Confederation of Swedish Enterprise after 31 December 2006, or who enter into collective ITP agreements after 25 April 2006, will be able to switch exclusively to a defined contribution ITP scheme subject to the approval of the union(s) concerned.

ITP 1 – The new defined contribution ITP plan Salaried employees born in 1979 or later	ITP 2 – The present ITP plan Salaried employees born in 1978 or earlier

Starting age Disability pension: 18 years	Starting age Disability pension: 18 years

Earnings Retirement pension: 25 years – 65 years.	Earnings Retirement and family pension: 28 years – 65 years
If an employee continues to work after this time, the two parties may reach agreement on the continued payment of pension fees until his/her employment ceases.	Employees are entitled to opt out of the future earnings of family cover, in which case the fees for this benefit will be used to supplement their ITPK and the family cover already earned will be converted into a paid-up policy.

Pensionable salary Cash gross salary, including overtime compensation , bonus, gratuities. Compensation for expenses is not included.	Pensionable salary Fixed annual salary (monthly salary x 12,2) including any average commission or bonus during the three immediately preceding years. Overtime compensation and compensation for expenses are not included.

Retirement pensions *New for both ITP 1 and ITP 2:* *Pension can be paid from age 55 at the earliest and for a limited period of at least five years.*

The entire retirement is defined contribution. The premiums paid by the employer are decided while the size of the pension is not decided in advance. The size of the retirement pension depends instead on salary, the premiums paid, how the money is managed and the charges made by the insurance company. The employee chooses one or more pension managers. At least 50 % of the pension contribution must be placed in a more secure savings scheme than an pure unit-linked insurance plan. The procurement of insurance provider with authorisation to manage ITP contributions is handled by the parties involved through the general ITP administrator Collectum.	Retirement pension contains two components: A defined retirement pension: The size of the pension is determined in advance as a proportion of final salary. The premiums paid by the employer should cover the promised pension and therefore more difficult 2. ITPK is a defined contribution supplement and the employee chooses the pension manager in the ITP choice.

Costs of retirement pension *New for both ITP 1 and ITP 2:* *Possible to raise premiums after agreement with employer and sometimes local union organization.*

The employer’s cost is known. Premiums correspond to 4.5 % of the employee’s salary up to 7.5 income base amounts (2007: SEK 344 250) 30 % for salary components above 7.5 income base amounts (no limit).	The cost to the employer is more difficult to predict. Premiums are calculated based on the employers ▪ salary ▪ age ▪ estimated period of service 2. ITPK premium corresponds to 2 % of the employees salary.
Alternative ITP for high earners Alternative ITP or solutions for high earners (so-called ten-pointers) are not included in ITP 1.	Alternative ITP for high earners Same rules as before but with one additional alternative: An employee who earns more than ten income base amounts can, after agreement with the employer, transfer entirely to the defined contribution ITP 1.

Waiver of premium for the employer applies ▪ In the event of work incapacity due to illness or accident ▪ for periods in excess of the sick pay period in accordance with the sick pay legislation ▪ in the event of parental leave with parent’s allowance due to the birth or adoption of a child (maximum 13 month per birth or adaptation) ▪ in the event of parental leave for care of own child.	Waiver of premium for the employer applies ▪ in the event of work incapacity due to illness or accident. The employer has total waiver of premium if the employee has been on the sick list for more than 90 days. This applies even if the period on the sick list is part-time, although at least 25 %.

Waiver of premium is proportion to the level of work incapacity.

The FPG/PRI system

For the new ITP-plan the FPG/PRI system cannot be chosen. However, an application can be made to the ITP board.	The book-reserve method is called the FPG/PRI system, where FPG (Försäkringsbolaget Pensionsgaranti) is the insurance company from which the employer has to take out a credit insurance policy to cover the risk for insolvency. PRI (Pensionsregistreringsinstitutet) is the company that registers the pension rights, calculates the liabilities, and pays out the pension when it matures on behalf of the employer

New pension agreement between the Swedish Trade Union Confederation (LO) and the Swedish Employer’s Confederation (Svenskt Näringsliv)

16 April 2007 a new agreement was signed between LO and Svenskt Näringsliv meaning similar terms for blue-collar workers and white collar-workers. Today the contribution for blue-collar workers is 3.5 percent of salary, in the new agreement contribution will increase to 4.5 per cent of salary up to 7.5 income base amounts, and 30 per cent for salary components above 7.5 income base amounts. Starting age for retirement pension: 25 years, not 21 years as before – agreement in this respect corresponds to the new ITP plan. The agreement is preliminary until accepted by all concerned member organizations within LO and Svenskt Näringsliv.

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	Raised income ceiling for cash sickness benefit and parental benefit Income Replacement In Case Of Sickness The first sick day is a qualifying day, which means no allowance is being paid. The employer is required by law to pay sick pay to the employees during day 2 - 14 of an illness. The benefit payable is 80% of the income. If an illness persists, the National Insurance Office pays out a cash sickness benefit from the 15th day of the illness. The benefit is 80 % of salary up to the ceiling of 10 price base amounts, i.e SEK 33,083 per month. This ceiling applies from July 1, 2006. Prior to that date the social security ceiling of SEK 24 812 applied. The increase of the ceiling affects 1.4 million employees. The employer is also required to partly finance the cash sickness allowance by paying 15% of its cost for those employees who are disabled full-time. Income Replacement In Case Of Maternity Or Parental Leave A parental allowance is payable for 480 days in order to stay at home from work and look after a child.The allowance can be drawn at any time until the child has reached age 8 or has completed the first grade at school. The parents can choose to draw a full, ¾, ½, or ¼ parental allowance. For 390 of the 480 days the allowance is 80 % of salary up to the ceiling of 10 price base amounts, i.e SEK 33,083 per month. This celing applies from July 1, 2006. Prior to that date the social security ceiling of SEK 24 812 applied. For the remaining 90 days the allowance is SEK 60 per day for children born before 1 July 2006 and SEK 180 per day for children born on 1 July 2006 or later.
	New pension agreement for private sector salaried employees The confederation of Swedish Enterprise (Svenskt Näringsliv) and the Federation of Salaried Employees in Industry and Services have agreed on a new ITP plan, which will start to be phased in as from January 2007. The new ITP plan is a defined contribution plan, contrary to the present ITP plan which is mainly a defined benefit plan. The new ITP plan will only apply to salaried employees born in 1979 and later, which means it will take a long time to phase in the new plan. The new ITP plan can also apply to salaried employees whose employer register with the Confederation of Swedish Enterprise as from January 2007, or who enter into collective ITP agreements after 25 April 2006. The contributions to be paid by the employer to the employees pensions is 4.5% of the fixed cash gross salary on salary components of up to 7.5 times the income based amount (SEK 333,750 in 2006), and 30% on salaries over this ceiling. Contributions are also paid during periods of sickness, parental leave or leave to take care of a sick child. Local or private agreements can be reached on allocating additional premiums to the pension. Part of the contribution may be used for family cover. Employees are entitled to transfer earned pension capital to another insurance provider. The pension is earned from age 25 until retirement age 65. If an employee continues to work after this time, the two parties may reach an agreement on the continued payment of pension contributions until his/her employment ceases. The employee chooses one or more pension managers. At least 50% of the pension contribution must be placed in a more secure savings scheme than a pure unit-linked insurance plan. Part of the contribution may be used for family cover. Employees are entitled to transfer earned pension capital to another insurance provider. Pensions are normally paid from the age of 65, but may be taken out from the age of 55. Pensions are lifelong but can be paid in full or in part for a limited period of at least five years. The size of the pension is determined by the amount of premiums paid, the return, fees and taxes, and for how long the pension is to be disbursed.
	Improvements of the old ITP plan, to take effect in January 2007 The parties have agreed on a number of improvements to the existing pension plan. ITP is normally disbursed from the age of 65, but may be taken out in full or in part from the age of 55. Now, instead of being exclusively lifelong, the entire pension can be disbursed for a limited period of at least five years. Employees will be entitled to transfer all or part of their earned ITPK capital to another Insurance provider. This also applies to original ITPK savings earned up to and including 31 December 2006. Employers and associations, local unions or employees may agree to supplement ITPK contributions with additional fees. Employees will also be able to supplement their ITPK with their private contributions in accordance with the regulations of the insurance company in question. The values of paid-up policies for original ITPK pensions will be raised and the rules governing salary limitation will be reviewed. Employees are entitled to opt out of the future earning of family cover, in which case the fees for this benefit will be used to supplement their ITPK and the family cover already earned will be converted into a paid-up policy.

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