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The Swedish deposit guarantee

For those of you who were around for the 2008 financial crisis the word “deposit guarantee” (🇸🇪 insättningsgaranti) might’ve stuck somewhere in the back of your mind. But the Swedish version has actually been around since the financial crisis of the 90s, to be exact it came into effect 1996.

But what does it actually mean? And should it impact how you think about where to keep your savings? The short answer: yes. So let’s look at how it works.

As one can elude from the name, someone/something guarantees something for someone else. Specifically it guarantees that you, the owner of a savings account with a certain bank, will be reimbursed by the state if the bank goes bankrupt. The guarantee is valid for all individuals (incl children) along with companies and other legal entities.

How much? Currently the guarantee caps out at 1 050 000 SEK per person + bank. Meaning you are covered above 1 050 000 SEK as long as you make sure to never keep more than that with one single bank.

It’s also worth noting that if a savings account has multiple account holders the guarantee is counted for each person individually (not collectively). Furthermore, the guarantee is not affected by owing a certain bank money (having a mortgage for example).

Are all banks and all accounts automatically covered by the deposit guarantee? No, only cash is covered (meaning savings accounts), not financial instruments such as stock/funds/bonds/ETFs. Furthermore each company offering a savings account must apply to have their savings account approved by the National Debt Office (🇸🇪 Riksgälden). If it’s not approved it won’t be covered by the deposit guarantee and the company must clearly inform their customers of this.

Just so you know though, the 3 best banks in Sweden (imho): Lysa, Nordnet and Avanza, are all covered by it.

But what about your investments via ISK or KF accounts? Aren’t they covered? No, not by the deposit guarantee. But, there’s a separate version called the “investment guarantee” which I’ll cover in an upcoming post. Stay tuned!

Kim1 Comment

AF vs ISK vs KF

Hey folx,

Let’s kickstart this pension saving/investment strategy Sweden edition by going over the 3 most common account types, how they work and why I think ISK is they way to go.

As mentioned, there are 3 common account types when investing in Sweden:
– Aktie- & fondkonto (AF)
– Kapitalförsäkring (KF)
– Investeringssparkonto (ISK)

They all function a little bit differently with regards to taxation and beneficiaries etc. Let’s go over them one by one.

Aktie- & fondkonto (AF)

This is a standard investment account, meaning you can trade funds, stock, bonds, exchange-traded funds (ETFs) and all other kinds of financial instruments, and as the account holder you’re the sole beneficiary of the account. This means that in the case of your death the content of the account will pass to your estate (🇸🇪 dödsbo).

Tax wise this is an account where your assets are only taxed at point of sale and at 30% of the profit in the case of a gain. Your gains and losses are then documented yearly when you do your taxes (deklaration) by including a so called K4 form. Most (if not all) online brokers can generate a complete K4 form for a small fee (worth it imho!). Do note that you will need to hold on to the 30% profit tax until it’s time to pay your taxes, meaning it’s not automatically deducted by your broker/bank.

It’s worth noting that AF accounts allow you to net your gains and your losses against their own kind. Meaning you can net a loss against a gain, thus reducing the total amount of tax you end up paying. However, this indicates that AF is an account more suitable for less passive strategies (more buying/selling). And since most (if not all) hobby investors would be much better off not meddling in their investment (at all) I won’t be recommending AF for passive investment strategies.

Investeringssparkonto (ISK)

This is a standard investment account, meaning you can trade funds, stock, bonds, exchange-traded funds (ETFs) and all other kinds of financial instruments, and as the account holder you’re the sole beneficiary of the account. This means that in the case of your death the content of the account will pass to your estate (🇸🇪 dödsbo).

This account was introduced in 2012 as an initiative to simplify investing for the “average Swede”. The main simplification revolves around taxation. The simplification consists of you not being taxed for actual income, gains and losses. Instead, a standard revenue is taxed. This means there’s no need to keep track of gains and losses or creating a K4 form. Instead, tax is deducted from your ISK account continuously through out the year.

Small note on the taxation %: the taxable amount is calculated as a 1/4 of the sum of:
– the value of your investments at the start of each quarter
– deposits to the account during the year
– the value of any transfers of securities to the account

The taxable amount is then multiplied with the government loan interest rate (statslåneräntan) as per 30th of Nov the year before + 1%. Do note that there’s a floor of 1.25% (the tax can never be lower than this).

Since the tax is continuously deducted from the account it creates virtually no overhead for you as an account holder when doing your taxes and makes it well suited for passive investment strategies.

Kapitalförsäkring (KF)

This is a standard investment account, meaning you can trade funds, stock, bonds, exchange-traded funds (ETFs) and all other kinds of financial instruments.

What sets it apart from AF and ISK is the way you can tweak beneficiaries of the account. Meaning you can for example have your kids added as the beneficiaries on the account, which would mean that the money will legally be theirs when they turn 18 (the age can be configured). This also means that in the case of death the value of your KF account will pass to any configured beneficiary of the account (rather than your estate as with AF and ISK). This is worth noting for “sambos” (partners living together) as sambos don’t have any legal claim on their sambo’s estate (🇸🇪 dödsbo).

Other than that KF is very similar to ISK, meaning a standard revenue is taxed and there’s no need to keep track of gains and losses.

Small note on the taxation %: the taxable amount is calculated as the sum of:

  • the value of your investments Jan 1st
  • deposits to the account during the year (Q1+Q2 deposits: 100% of the value, Q3+Q4 deposits: 50%)

The taxable amount is then multiplied with the government loan interest rate (statslåneräntan) as per 30th of Nov the year before + 1%. Do note that there’s a floor of 1.25% (the tax can never be lower than this). This amount is then taxed at 30%.

So as you can see there’s a slight difference in how the standard revenue tax is calculated for ISK and KF respectively.

Another major difference, compared to the other account types, is the fact that if you own stock in a company via a KF you do not have the right to vote at annual general meeting, but if you own the stock via a AF or ISK you do. This usually isn’t a game changer for most regular investors but it’s worth noting.

Conclusion

For passive, long-term (10+ years) investment strategies without the need to configure beneficiaries, ISK is the best choice. You can open one free of charge at any of the best online investment banks in Sweden: Lysa, Avanza or Nordnet.

Why am I not mentioning any of the “big banks” in Sweden? I’ll let you know in an upcoming post.

KimLeave a comment

union powered income insurance

The company Mysafety Försäkringar are currently running adds on social media for their income insurance, and while doing so, taking jabs at unions and the income insurance they provide. Let’s take a closer look together. Here’s the copy for the Facebook add:

“Only 90 days qualifying period and 11 months of compensation. An income insurance usually has 12 months qualifying period and 7 months of compensation.”

So let’s see which income insurance will be the best choice for our fictional character Emma, a regular white collar worker with a monthly salary of 41.000kr.

Unionen income insurance (incl in membership):
Fee: A-kassa 100kr + membership fee 235kr = 335kr
Salary ceiling: 60.000kr
Qualifying period: 12 months
Compensation period: 7 months (150 days)
Amount: 70-80% of the base salary

This means that during 7 months of unemployment Emma’s income will be ~32.800kr before tax, ~22.300 after tax (32%). Akassan covers at most 26.400kr, so Unionen tops up her salary with 6.400kr a month.

Mysafety Försäkringar
Fee: A-kassa 100kr + insurance fee 199kr = 299kr
Salary ceiling: 45.000kr (to match Unionen’s 60.000kr the fee goes up to 269kr)
Qualifying period: 3 months
Compensation period: 11 months
Amount: Fixed taxfree sum depending on your insurance fee

This means that during 7 months of unemployment Emma’s income will be ~26.400kr before tax (from A-kassa), ~17.950kr after tax. And then an extra taxfree payment of 4.352kr, giving her 22.304kr a month. And the same is true for month 7-11.

Looks more or less the same right? The private insurance even lasts for longer? 🤷🏻‍♀️ Yeah, except with Unionen you get a full blown union members for basically the same cost and that includes so much more than just income insurance (free legal help just to mention one thing).

But, as always, the devil is in the details. Which means fine print. And, once you start reading the fine print of the MySafety insurance, the choice should be dead easy.

“To be eligible for the insurance, you must be permanently employed for the past 12 months. You must be a member of a Swedish unemployment insurance fund (A-kassa), not over 55 years of age and not have received unemployment insurance in the last 2 years. You are also not allowed to have received a personal notice, or due to your position at the company, be aware of any upcoming notice (varsel).”

Unionen only fine print? “You need to have worked at least 80 hours per calendar month in total of 12 months during the last 18 months.”

Case closed. Union membership FTW.

Kim1 Comment

10 years in tech

Next year marks my 10th year in tech. A staggering 56% of women leave the tech industry 10-20 years into their careers, which is double the rate of men.

And contrary to what many of you reading this might think, we’re not leaving to start a family. We’re being pushed out by biased management and the toxicity of having to work in an environment which is inequitable (by design) for women.

It’s death by a thousand papercuts. It’s being asked to take notes for the gazillionth time in a meeting where you’re the only woman present. It’s being told that “wow, you’re pretty good at this” as if that’s a compliment. It’s being passed over for promotions, because the position was filled (by another dude) before it was even advertised. It’s being asked “where are the sandwiches?” at tech meetups/conferences, because someone who looks like you can’t possibly be a dev. It’s being called a “diversity hire” by dudes with half your experience/skill set. It’s constantly being told in performance reviews that you’re not quite technical enough yet, although you’re the most senior member on the team and in charge of all system design.

There were numerous times I thought about quitting. And thankfully each time I managed to convert the anger and frustration into energy to propel me forward. But my heart breaks for all of us who don’t, because we really shouldn’t have to 💔

Looking at the top picture, which was taken on my first day at Klarna, I just want to hug her. I want to hug her and tell her that “it’ll be OK, some things will suck, but you’ll get through it and in between the papercuts you’ll have soooo much fun”.

Basically (so far), it’s worth it 💜

KimLeave a comment

occupational pension with/without a cba

Since financial literacy is something dear to my heart, pensions and the Swedish pension system have always been something I find it very important to understand. It’s also one of the most important aspects of Collective Bargaining Agreements (CBA) or 🇸🇪 kollektivavtal, because they regulate how much occupational pension your employer deposits on your behalf.

As regulated by CBAs the occupational pension deposits look like this:
– 4.5% to 6% of your salary up to 46 438 kr (2023)
– 30% to 31.5% on any excess amount, above 46 438 kr

For someone earning 50 000 kr/month that’s a minimum 3 159 kr/month in pension deposits (37 896 kr yearly).
4.5% x 46 438 = 2 090 kr
30% x (50 000 – 46 438) = 1069 kr
Total: 3 159 kr

Now, let’s do a comparison between a private pension solution (Avanza 75 default fund) and the CBA one (ITP1). And let’s pretend the same % of money is deposited by Company X (despite not having a CBA) out of the goodness of their hearts.

Some assumptions about our Jane Doe and the financial markets:
– starting salary = 50 000 kr
– 2.5% YoY salary increase
– stays at Company X for 5 years
– accrues compound interest for another 25 years before retiring
– 6.0% YoY value increase on the invested funds
– private pension fund capital fee = 0.66% (Avanza 75 default fund), which is actually ok and one of the “better” private solutions you could get, there are far worse ones with fees above 1%

At the end of year 5 the employer will have paid approx 286 481 kr in pension deposits into Avanza, incl 6% YoY value increase and minus 0.66% in annual fees. And after 25 years Jane’s pension fund will be worth 1 041 949 kr, at which point Jane will have paid 187 590 kr in fees (!).

Had this been the CBA solution (ITP1) Jane’s fund would be worth 291 254 kr at year 5, incl 6% YoY value increase and minus 0.09% yearly fund fees (capped at 600 kr) and 0.8521% yearly deposit fees (capped at 450 kr). And after 25 years it would be worth 1 209 929 kr (167 980 kr more than the Avanza option), at which point Jane will have paid approx 20 100 kr in fees, since they cap out at 450 kr and 600 kr yearly respectively. That’s 11% of the Avanza fees.

Now imagine if Jane Doe were to spend 30 of her working years in different companies without CBAs. Actually, don’t imagine it, let me do the math instead: 30 years would result in Jane Doe losing approx 650 000 kr in fees to the Avanza solution.

With an even worse solution (like SEB) with yearly fees of 1,06%, we’re talking 1 100 000 kr lost to fees!

KimLeave a comment

spotify and the anti-union propaganda

So, it’s been brought to my attention that Spotify are handing out “information” flyers in front of one (or more?) of their Stockholm offices. As expected it’s more desinformation and anti-union propaganda than anything else. So let’s clear some things up. I’ll list some points from their flyer below and we’ll sort out how a Collective Bargaining Agreement (CBA) actually would or wouldn’t influence life/work at Spotify. Here we go!

– “Spotify offers better terms and conditions than a CBA”.
Great! Nothing in a CBA prohibits an employer from offering better/more benefits than what’s included in the CBA.

– “If we had a CBA we’d have to join an employer network/org that negotiates on behalf of many employers. We’d be expected to fall in line and not stand out.”
Yep, the larger CBA for Spotify would probably be Teknikavtalet, which is a “base CBA” tailored to tech companies just like Spotify. Local arrangements/additions could still be negotiated though with the local reps. Nothing stopping that and also very unclear what it means to “fall in line”? Vaguest point yet 🤦🏻‍♀️

– “Without a CBA downsizing/letting people go is actually harder for Spotify as we have to follow more strict legislation”
Wrong. Their MO here really is “the Devil reading the Bible” 🤦🏻‍♀️ Companies with a CBA still have to adhere to the compulsory (tvingande) parts of the Employment Protection Act (LAS). Some areas in LAS however _can_ be (don’t have to be, again that’s a negotiation!) overriden by the CBA. For example, in a scenario where the employer wants to downsize and there’s a CBA, the employer and union could sit down together to agree on the new shape of the org and how to staff it. Which would result in LIFO list, aka avtalsturlista (main factor still being tenure at the company). And with a CBA the employer is also allowed to exempt 3 people from the LIFO list. How is this worse in any way? Sounds way better, smoother and likely to succeed imho because the employer would leverage the union’s deep/hands on knowledge of the org and how to staff it for success? 🎉

– “A CBA is worse because it delegates access to information and influence to the local union club, away from the individual.”
To this I really just want to say, “divided we beg, united we bargain”. Of course they want to make you believe that your individual voice/concerns/opinions would weigh as much as an organised united offensive lead by your union reps. But we all know that’s a lie. It’s in their interest for you to stay divided, that way you’ll never be strong enough individually to actually push for change. Don’t buy the lie.

Now, they also list a bunch of current employee benefits in a table with one column saying “Spotify” and one saying “CBA”. For most of the benefits the just write “N/A” in the CBA column. And this has got to be the worst attempt at a “burn”/mic drop I’ve ever seen?! There’s absolutely NOTHING stopping Spotify from continuing to offer these benefits even with a CBA in place. Nothing. Niente. Nada.

Lemme just list some of the most important ones because they’re getting them wrong too (of course).

1. Pension
They’re trying to make you believe that their private pension offer is better than the CBA one, which has fund fees around 0.09% that caps out at 600kr per year (Alecta) and a deposit fee of 0.8125%, which caps out at 450kr per year+employment. By comparison a private pension offer with SEB clocks in at 0.18% in admin fees (yearly) and on top of that you’re paying between 0.88% for the default fund. That’s 0.09% vs 1.06% in yearly fund fees. With a pension fund of a couple of 100 thousands that’s thousand of kronor in fees _every year_. And we all know compound interest right? Ie in this case the importance of low fees. You do the math.

2. Salary budgets
Again, the so called mark/”märket” is not a ceiling. The big industry employers and unions recently agreed on 4.1% (2023) and 3.3% (2024) salary increases for the export/import sensitive parts of the Swedish labour market (to safeguard our national competitiveness). There’s absolutely nothing stopping Spotify from offering bigger salary increases than this. That’s just blatant lies.

OK. That’s it for now. If you read this far, yay! Hopefully you have a little more information to make your own analysis/decision now 🙏

Divided we beg, united we bargain ✊