In order to receive the same pension as if you were an employee, you need to draw a salary or have a net profit and pay contributions and taxes to contribute to your national public pension. To offset the occupational pension that most employees have through their employers, you should also save at least 4.5% of your income.
The amount of pension you receive from the Swedish Pensions Agency depends on how much you have paid in taxes and contributions to the Swedish Tax Agency. There are two different pension contributions that you have to pay as a self-employed person: the old-age pension contribution, which corresponds to the contribution that employers pay for their employees, and the public pension contribution, which you pay as a wage earner through your taxes.
Video: Pension for business owners
Public pension for sole traders, trading partnerships or limited partnerships
When you run a sole trader business, a trading partnership or a limited partnership, the net profit that you declare and pay tax on is what entitles you to a general pension. The smaller the net profit you are taxed on, the smaller your public pension.
You pay old-age pension contribution of 10.21% of the net profit from your active business activities. The old-age pension contribution is part of the 28.97% in self-employed social security contributions you pay on your net profit. Like ordinary wage earners, you also receive credit for the public pension contribution, which represents 7% of the net profit on which you pay tax.
Public pension for limited companies
When you run a limited company, you have to draw a salary to receive a pension. It is the salary you draw and pay taxes on that give you your public pension.
If you run a limited company, the company pays old-age pension contribution at 10.21% of your salary. The old-age pension contribution is part of the employer's contributions totalling 31.42% of your salary which the company pays to the Swedish Tax Agency. Like ordinary wage earners, you also receive credit for the public pension contribution, which represents 7% of the salary on which you pay tax.
Maximum your contribution to the public pension
To start earning money for your public pension, you must have an annual income of at least SEK 24. 238 (2024). There is also an upper income limit for pension entitlement that corresponds to a salary of SEK 49. 938 per month (2023). If you can draw that salary or that net profit, you maximise your public pension.
Personal pension savings
Most employees receive an occupational pension from their employer, in addition to the public pension they receive from the state. As a self-employed person, you will have to make up for the loss of occupational pension by saving for your own pension. As a rule of thumb, you should save about 4.5–6 % of your salary or surplus. This is equivalent to what most employers pay into their employees' occupational pensions.
If you take out a salary or surplus that is higher than SEK 47,625 a month (2024), you need to save 30-31.5 percent of what exceeds that amount in order to receive the equivalent pension that an employee with a collective agreement receives.
Sustainable pension savings
Occupational pensions for employees can be one of the biggest purchases a company makes. It may therefore also be where a company has a large part of its sustainability impact, if pension money is invested and managed in companies that do not contribute to a sustainable society. Ask your pension provider how they can make it easy for you and your employees to choose sustainable funds and investments.
Tax-deductible savings for limited companies
Unlike ordinary employees, if you run a limited company you can pay into and make deductions for private pension savings. You can make deductions for private pension savings up to 35% of your salary in your income tax return. To be able to make deductions, you must invest in a pension insurance or a pension savings account. The deduction may not exceed 10 times the price base amount, i.e. it is maximum SEK 525,000 (2023).
As usual, your company pays employer's contributions on the entire salary, but you avoid income tax on the part corresponding to the deduction because the savings are deductible in your tax return.
Tax-deductible savings for sole traders
Unlike ordinary employees, if you have income from active business activities, you can pay in and make deductions for your private pension savings. You can deduct up to 35% of your business income for private pension savings. To be able to make deductions, you must invest in a pension insurance or a pension savings account. The deduction may not exceed 10 times the price base amount, i.e. it is maximum SEK 525,000 (2023).
Private savings can lower your public pension
As a sole trader, if you deduct pension savings, you reduce the net profit on which your public pension and many other social security benefits are based. You reduce it by the amount of the pension savings plus 24.26% of the pension savings amount as the so-called special payroll tax.
If you want full earnings for your public pension and access to social benefits such as sickness benefit, you should avoid deducting private pension savings as long as you have a net business profit of less than about SEK 49,000 a month (2023).
Your pension during parental leave
Are you an entrepreneur and planning for parental leave? It is a good thing to be aware of what happens to your pension during this time. Here are some things to think about:
- Parental allowance counts towards the public pension.
- The parent who earns the least receives extra contributions to the public pension during the child's first four years.
- If you have a private pension savings/occupational pension, it is good if you can continue this payment even during parental leave.
A tip is also to share parental leave and possible part-time work after the parental leave.
Continue to run the company when you turn 66
If you want to continue running your business after the age of 66 you can earn more money because you get tax benefits. You can continue to run the company even if you have started withdrawing part or all of your pension.
Increased employment tax credit
From January of the year you turn 66, you get an increased employment tax deduction and then pay less tax on your earned income.
Lower employer contribution or personal contribution
From the year you turn 67, your employer contribution or personal contribution is reduced. You will then only pay the old-age pension fee, which is 10.21 percent.
Increased basic deduction
From the year you turn 67, you get an increased basic deduction. This results in lower taxes on income and on pensions.
If you are a sole trader you can reduce your own contributions from the age of 63 or 64. You can do this by withdrawing your entire state pension. More detailed information and pension tips for entrepreneurs of all ages can be found on the Swedish Pensions Agency's website.