​Alecta ramps up DB contributions by 16%, blaming longevity and yields

Posted On Sep 29 2020 by

first_imgOngoing contributions to the ITP 2 old age pension are going up by 16% on average, Alecta said, adding that nine percentage points of this related to the change in interest rates with the other seven points because of changed life expectancy assumptions.The increase in the contribution applied to newly-written plans and increases in benefit levels, Alecta said, as well as to a type of retirement pension that is agreed separately between employees and employers (avgångspensioner).But the contribution level for existing insurance benefits is guaranteed and, therefore, not affected by the decision, it said.The changes are to take effect on 1 March. Sweden’s biggest pension fund Alecta has announced it is increasing the cost of its defined benefit (DB) pension for new plans by an average of 16%, saying falling bond yields and increasing longevity has meant it has to charge more.Fredrik Palm, product manager at the SEK928bn (€86.9bn) pension fund, said: “The fact that long market rates have fallen over the past year has a negative impact on our expectation of future returns.“At the same time, we expect life expectancy to continue to increase,” he said.Palm added that the firm was now implementing a change in the cost of its premiums to make sure they were high enough to allow Alecta to meet its insurance obligations in the long term.last_img read more