Flexpension – a benefit in some collective agreements

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Flexpension is a concept found in some collectively agreed occupational pension schemes. Flexpension, or partial pension as it can also be known, enables an employee to reduce their working hours and continue working instead of retiring. This gives the employee greater flexibility in shaping their retirement. 

Flexpension is a relatively new pension benefit. It has been available to government employees since 2003. In the private sector, it was introduced in most agreements in or after 2013. Since it has not been around for a particularly long time, this type of pension has not yet been paid out, but in some 20–30 years' time, flexpension could be of great importance to employees as the capital accumulated under the scheme could provide them with returns without having to resort to their normal pension capital.

What does flexpension entail? 

Flexpension can vary depending on the collective agreement in question, but common to all forms of flexpension is that they are comprised of two different parts. The first part entails the employer paying an additional occupational pension premium. The second part entails the employee cutting their working hours, a type of semi-retirement. 

If an employee starts drawing a fully paid-up flexpension, their regular occupational pension is not affected. However, cutting their working hours and working less means smaller allocations to their state pension. 

Should an employee choose to use their flexpension, they are not automatically entitled to return to their previous level of employment unless they have reached such an agreement with their employer. 

Accordingly, this is not a unilateral decision to be made by the employee. 

Who can use flexpension?

Starting to draw flexpension is not a right. The employer can decline such a request if it would significantly disrupt operations. If the matter is referred to local and then central negotiations and no agreement can be reached, the employer's decision stands.

So, Flexpension is a benefit in some collective agreements. The following agreements include flexpension:

  • White-collar employee agreements – ITP1 and ITP2
  • Government employee agreement – PA16 sections 1 and 2
  • Local and regional authority agreements – AKAP-KR, AKAP-KL, KAP-KL
  • SAF LO

In the 2023 collective agreement negotiations, the broadening of the flexpension scheme is being pursued by the trade unions. This is to make it easier for employees to cut their working hours as they approach retirement. 

Do you have an employee who wants to use their flexpension? 

Be sure to draw up an agreement together that includes:

  • The date as of which the employee is to reduce their working hours
  • The salary for the new level of employment
  • The level of employment to apply
  • Confirmation of the understanding that the new level of employment is permanent

Ask for help

Would you like help with flexpension matters? Please don't hesitate to contact us here at Azets – we're happy to help you.

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