Sweden – more generous than what EU law demands

The Swedes had been interpreting EU social security regulation wrongly. The government felt it would not be right to suddenly withdraw these people’s pensions, and made sure the old rules continued to apply until the end of 2019. Soon, though, a committee will present proposals for new rules. 

The guaranteed pension is part of the general pension system and is meant to be a basic protection for people who have been earning so little that their income-based pension is very low or non-existent. This means the guaranteed pension is reduced in relation to the income-based pension. 

Before 1994, the people’s pension (as it was called then) only covered Swedish citizens living in Sweden, but when Sweden joined the European Economic Area, EEA, it was considered impossible to maintain these kinds of limitations.

Full pension after 40 years

The pension system was overhauled, and the right to a guaranteed pension became dependent on how long someone had been living in Sweden. A full guaranteed pension would only be available to those who had been living in Sweden for 40 years or more. However, EU law was interpreted to mean that whoever had earned their guaranteed pension would be allowed to keep it, even if they moved abroad. In December 2017, the EU Court concluded this was a misunderstanding.

EU rules on the coordination of social security systems divide social security benefits into different categories. The guaranteed pension is, according to the EU Court, a so-called minimum benefit which does not have to be paid to someone who moves abroad.

Nothing stops a country from being generous

Thus, if Sweden had wanted to, it would have been possible to immediately withdraw the guaranteed pension from these people. But it was considered unreasonable to suddenly change people’s economic situation when they had been planning for their retirement based on current rules, without giving them a chance to prepare. Since nothing stops a member state from being more generous than what EU law demands, Sweden continues to apply the rules as before. 

Meanwhile, a commission has been tasked with developing proposals for new rules, which will include looking into whether the guaranteed pension should only be available to people who have a right of residence in Sweden. Another issue is how people qualify for a guaranteed pension. The EU Court also concluded that it is not sufficient to count periods of residency in Sweden, and that residency and insurance periods in other member states must also be taken into consideration.

Not the first time

The commission will present its report on 29 November. In other words, what is or is not allowed depends on how the different social benefits are classified by EU rules. This is also not the first time that Sweden has experienced that the EU Court views Swedish benefits differently than Swedes themselves do.

In 1998, the Court concluded that Swedish parental pay is a family benefit, not a maternity benefit as it was considered to be in Sweden. This meant the woman concerned in that case did not herself have a right to receive Swedish parental pay after having moved to Finland. 

On the other hand, she did have a right to receive Swedish parental pay because her husband still worked in Sweden. The latter is completely incompatible with the way Swedish parental leave allowance is designed, where each parent is insured independently of the other.