What is a pension foundation?

In principle, a pension foundation is a separate legal entity which is established to secure pensions for an established group of recipients recognized in the foundation statues. The pension foundations main purpose is to manage assets and grant disbursements for pension costs related to the employer.

A pension foundation can be formed by any company – as a way of safeguarding pension promises outside of the company balance sheet.

Private business owners or partners in a partnership may not secure pension promises on their own behalf, but only for employees. 

The pension foundation

  • is an independent legal entity with its own board of directors - the board of directors determines, among other things, how the assets shall be managed
  • must maintain accounts of its transactions and prepare annual reports
  • pays tax on returns from pension funds in the same manner as insurance companies
  • is subject to supervision by Länsstyrelsen (the County Administrative Board) and Finansinspektionen if the Foundation covers more than 100 beneficiaries.

The employer 

  • undertakes pension (promises) by entering into pension commitments with the employees
  • makes a provision to the foundation (payment)
  • disburses pensions to retirees
  • collects compensation for disbursed pensions from the foundation.

Read about pension foundations for companies with ITP book reserve method pension schemes

Read about smaller pension foundations