In accordance with the central collective agreements between the Swedish Agency for Government Employees and Saco-S and OFR/S (PA 16), public authority employees have the option to exchange their salary (salary exchange) for a payment by the employer of an agreed amount into an occupational pension. At present, this is an option for members of Saco-S and OFR/S as well as unaffiliated employees.
What is salary exchange?
Salary exchange means that an employee exchanges a proportion of their gross salary, i.e. salary before tax, for a benefit – in this case an occupational pension. The employee pays no tax on the salary exchange amount, but pays income tax when the money is paid out as a pension.
Salary exchange can be financially advantageous for employees with a gross salary exceeding 7.5 times the income base amount (2020: SEK 44 923 per month*). Employees whose gross salary after salary exchange falls below the amount above lose, among other things, old-age pension in the state pension system. Parental allowance, sickness benefit and unemployment benefit may also be affected, depending on the size of the salary after salary exchange. In general, salary deductions and salary supplements that are the result of central collective agreements are also affected.
At Lund University the employer can, according to agreement with the employee, allocate at least SEK 500 and, in total, a maximum of 35 per cent of the employee’s gross salary (including other pension premiums in accordance with central agreements).**
In salary reviews, a salary is considered without taking the salary exchange into account.
The employee can register their request for a salary exchange on Primula Web as from 1 October 2018. On the employer’s behalf, the agreement is signed by the person who has been delegated to enter such an agreement.
Who can obtain a salary exchange at Lund University?
The salary exchange option extends to employees who are members of Saco-S or OFR/S as well as unaffiliated employees, and the maximum period it can apply is until the calendar month before the month the employee reaches the retirement age of 65.
How to obtain a salary exchange
The process is as follows:
- The employee registers their request for a salary exchange on SSC Primula under “My page”.
- As the employer has an obligation to inform affected employee organisations about the salary exchange in accordance with PA16, the employee needs to state the organisation to which they are affiliated in the request for a salary exchange. This is done in the field “Message” with a note of either “Saco”, “OFR” or “Unaffiliated”.
The salary exchange comes into effect at the earliest in the month after the agreement has been made. Lund University thereafter pays the agreed amount each month into the occupational pension. The money is placed with the insurance provider selected by employee. If the employee has not made an active choice, the money is placed with Kåpan Pensioner.
Termination or cessation of the salary exchange agreement
The agreement can be terminated by both parties with a notice period of three months. If the agreement is terminated by either of the parties, the salary exchange amount is exchanged back into salary.
Salary exchange can only be implemented if there are conditions for making a salary deduction for the amount to be exchanged for a provision to an occupational pension. In the case of full-time leave, for example, the agreement ceases to be valid.
Changing the salary exchange amount
If the employee wishes to change the salary exchange amount, a new application must be submitted and a new, separate agreement must be made. A new agreement with a new salary exchange amount automatically replaces the previous agreement.
Advice and further information
Lund University does not provide advice on matters relating to salary exchange. For further information, consult the National Government Employee Pensions Board (SPV) and advisors on banking, pensions and related matters.
*) As the pension-determining income is calculated after deduction of the state pension charge, this means in effect that the income ceiling is 8.07 times the income base amount.
**) The upper limit is in view of the Income Tax Act (Chapter 59, Section 5), which permits a right to deduction up to a maximum of 35 per cent for the employer.