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Sweden’s income gap grows as more people than ever are at risk of poverty

More people than ever in Sweden are considered to be at risk of poverty, new statistics show.

Sweden's income gap grows as more people than ever are at risk of poverty
The measurement is based on the proportion of people whose income is less than 60 percent of the medium income. Photo: Anders Wiklund/TT

The proportion of people at risk of poverty topped 15 percent for the first time in 2019, according to data published by Statistics Sweden this week.

This is a relative measurement, also called 'low economic standard' in Sweden. It is based on the proportion of people whose income is less than 60 percent of the medium income, so it doesn't necessarily mean that the poorest have less money in their wallets than in previous years.

But it does mean that they have less compared to their peers, and that gaps between rich and poor are increasing.

“This can create tensions and can be serious,” professor Daniel Waldenström, who researchers income gaps, told the TT newswire.

“Everyone with a job has had significant increases in income over the last 20 years,” he said, adding that this meant pensioners, students, and the unemployed are relatively worse off. But Waldenström said that the proportion of people in absolute poverty had decreased.

Income gaps were also present between Swedish- and foreign-born people in Sweden, with the economic standard of the latter just 77 percent of that of native-born Swedes, a figure that has remained relatively stable over the past decade.

Statistics Sweden's measurements do not take into account the impact of the welfare system in Sweden, which reduces poverty among children and pensioners through for example child or housing benefits and subsidised health and dental care.

The demographic with the highest proportion (41 percent) of people living at risk of poverty according to this measurement is single women over 80, followed by people aged under 20 (20 percent). 

Overall, households' economic standard increased by 0.7 percent in 2019, the slowest rate of growth since the 1990s – and due to the pandemic this may have slowed even further in 2020.

Differences in income, measured using the Gini coefficient which gives a score between 0 and 1 (where 0 means all households have the same income and higher values represent greater disparities), increased in 2019.

The richest ten percent of the population accounted for 26 percent of income, while the half of the population with the lowest income accounted for just 30 percent of the total.

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EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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