Would you retire at 65?
The idea “pensioner at 65” sensible to be re-evaluated. In Sweden, life expectancy has increased by 23 years for both women and men in the last hundred years. Because of this, more people choose to continue working after the age of 60 and also 70 years. The LAS age, ie the age you have the right to remain in the labor market according to the Employment Protection Act, applies today until the employee is 68 years old. In fact, by 2023, the age limit will be raised in the next step to 69 years. The right to continue working until old age is enshrined in law in LAS. The employee has the right to remain in his employment, the law is binding for the employee’s benefit and it is not possible to cancel. Until now, one third of those working between the ages of 65 and 74 are self-employed.
According to LAS
In accordance with section 33 of the LAS, when the employee has reached the age for the right to remain in employment, the employer may dismiss the employee through a simplified dismissal procedure. No factual basis is needed in the event of dismissal of an employee who has reached the age limit. As a matter of fact, the employer is not obliged to state the reason for the dismissal in the event of dismissal of an employee who has reached the age limit and the employee cannot annul the dismissal.
From Retirement Age to Target Age
At one time, 65 years has been considered retirement age, regardless of when you were born. However, this is replaced by target age. For pensions, it is the so-called target age that governs when the general pension can be taken out. The target age will also govern when the guarantee pension, housing supplement and old-age support, which are parts of the basic protection, can become relevant at the earliest. The idea is that the target age should be automatically adjusted upwards, corresponding to approximately two thirds of the increase in life expectancy. This idea comes from the fact that different generations have different target ages depending on the average life expectancy of that particular generation. Meaning to say, that today’s 35-year-olds can expect a target age of approximately 70 years.
From TAX perspective
From a tax perspective, it is beneficial for both employees and employers to extend working life. Employees over the age of 65 receive an increased basic deduction so that no tax is paid on income below a certain level, and an increased employment tax deduction which means a lower tax on work than before the age of 65. Further, the tax on work is lower than the tax on pensions. For employers, costs fall when the employee turns 65. This is partly due to the fact that the employer’s contribution decreases for employees after the age of 65, and partly due to other conditions for occupational pensions.