How many Swedes invest in shares or funds?

Although you might expect the centre-left Social Democrats to be sceptical of private investment, according to Henrik Tell, a Stockholm-based independent financial advisor, all parties have tended to promote greater share ownership among the public, with the government of Göran Persson launching a concerted campaign to get people to invest in the state telecoms company Telia when it was floated back in 2000.

“There was a lot of encouragement for private people to go in as owners and so on,” he remembers. “And then the pension system is also equity-oriented and has been for some time now.” 

Some 2.7 million Swedes owned shares at the end of 2021, according to a report by Euroclear, meaning that 25 percent of the population now own shares, the highest proportion since share ownership started to fall in 2010. That’s a higher share than in the UK, where only 12 percent of households own shares directly, and far above most other European countries. 

As far as investment funds are concerned, just under half, or 45 percent, of Sweden’s population over the age of 20 have savings directly with investment funds or in an ISK, with that number hitting almost 100 percent when passive exposure to shares through the premium pension scheme, offered to all taxpayers in Sweden, is included.

What kinds of account are there for investing in Sweden?

First off, you have a depå, or an aktie- och fondkonto, often shortened to an AF. This is an account, held either with a traditional bank such as Swedbank, SEB or Handelsbanken, or with a specialist bank/online broker such as Avanza or Nordnet, used to hold and deal in shares or funds.

An investeringssparkonto or ISK is a ringed account for savings, shares and funds, which is not subject to capital gains tax, but is instead taxed at a fixed rate, known as schablonskatt, an annual rate paid on the entire value of the sum held.

With both ISKs and AFs you own the shares and funds yourself, meaning in some cases that you can vote in company annual shareholder meetings. 

A kapitalförsäkring or KF is an insurance product where shares, funds and other savings are held in your name by a bank or insurance company. A KF is taxed in the same way as an ISK. As you do not own the shares or funds directly, you cannot vote in company annual shareholder meetings.  

Which type of account should you choose? 

Again, it depends.

AFs are certainly more complicated, as they require you to declare any profits (or losses) on the sale of shares in your tax declaration each year.

You need to declare the total acquisition price and the total proceeds of any sales, so it can get messy if you trade often throughout the year, although it also lets you subtract any losses you’ve sustained by selling shares during the year from the total amount you’ll need to pay in tax.

You don’t need to do this with funds in ISKs, as any losses or gains are automatically calculated for you and communicated to the Tax Agency.

AFs are also highly taxed, with capital gains tax of 30 percent payable on any profits or dividends over the course of a year.

Capital gains tax is only payable on dividends or shares that you actually sell, though, so you won’t need to pay tax on your investments if you’re planning on hanging on to them.

They can be useful if you’re buying high risk shares and you want to be able to subtract any losses from your total tax owed at the end of the year, or in a situation where the market crashes, as you don’t pay as much tax on investments which drop in value.

On ISKs or KFs, you don’t pay this 30 percent capital gains tax, but you do pay the schablonskatt every year, no matter whether the value of your portfolio has gone up or down, or if you’ve sold anything throughout the year.

This rate applies whether you make a profit or not, and any uninvested savings in this account are also included in your schablonskatt, so it’s not a great idea to put money in an ISK without investing it into shares or funds.

At 0.882 percent in 2023, the schablonskatt may seem like a small amount – think of it as 882 kronor per 100,000 kronor in your account per year – but over a lifetime of saving it can be significant. 

An ISK or kapitalförsäkring makes sense if you’re making a profit on your investments (which hopefully, you are). As a good rule of thumb, if you’re expecting to make a gain on your investments of at least 2 percent, you’re probably better off with an ISK instead of an AF.

Here’s an example:

You invest 100,000 kronor at the beginning of the year which increases in value by 7 percent, or 7,000 kronor.

In an ISK, you’ll pay schablonskatt on the total value of your investments at the end of the year, which you can figure out by multiplying the total value of your portfolio by 0.00882, giving you a tax bill of 943.74 kronor.

In an AF, you’ll pay 30 percent tax on your 7,000 kronor profit if you sell during the year, so 2,100 kronor.

If you make a loss of 20 percent, however, so if your portfolio drops from 100,000 kronor to 80,000 kronor, you would still be paying 705 kronor in tax if you had an ISK, whereas if you had an AF you would pay no tax at all.

Another advantage of an ISK or KF is that you don’t need to declare your profits or losses, this is all done for you by your bank or sharebroker, so it’s a lot less paperwork.

For most people, it makes more sense to invest through an ISK than a KF.

KFs sometimes require you to pay tax each quarter rather than each year, and can be subject to higher fees than ISKs. You also don’t own the shares yourself, your bank does, so you can’t vote in shareholder meetings.

The advantage of a kapitalförsäkring is that it is very flexible. You can set it up so that it pays out a certain sum every month, make your children the beneficiaries, or lock in funds until you reach a certain age, making it similar in some ways to a pension account. 

“You can save until a certain age, for example until 65 years old, and then you can tell the insurance company that you want a monthly payout for the rest of your life or for 20 years, and then you will have that automatically,” explains Stefan Thelenius, a pensions and insurance expert at the Swedish Consumers’ Banking and Finance Bureau. 

KFs can also be useful if you have a high amount of non-Swedish shares which provide dividends, as it makes it easier to declare these to the Swedish Tax Agency. 

You can also open a kapitalförsäkring as a company, but make a person the beneficiary, which you can’t do with an ISK. You can also set who will receive a payout from the fund on your death. This will happen automatically, which can make inheritance simpler. 

It’s still a good idea to be aware of specific rules in your home country, especially if you are still eligible to pay tax there.

In the US, for example, ISKs are very difficult to report to tax authorities, and you may be penalised for owning mutual funds over a certain amount – which is common both in ISKs and kapitalförsäkringar.

What bank or provider should I choose? 

When saving with a kapitalförsäkring it can make an enormous difference what bank you choose, as some levy extremely high fees. If you run a comparison on the Swedish Consumers’ Banking and Finance Bureau’s website of the fees you will be charged if you save 5,000 kronor every month for 20 years, the most expensive provider, SEB Kapital, charges 322,000 kronor, a full quarter of the 1,262,000 saved, whereas the cheapest, Avanza, charges just 28,500 kronor. That’s a big difference. 

Similarly, if you have an ISK or deposit account with one of the specialist stockbrokers such as Avanza or Nordnet, it tends to be significantly cheaper to buy and sell shares than it is if you have a similar account with a normal consumer bank such as Swedbank, SEB or Handelsbanken. The advantage of using your normal bank is that it is slightly more convenient to have all of your savings and income in one place. 

Why is it important that some foreigners moving to Sweden invest?

The Swedish pension system is designed for people to pay in to over about 30 years, so if you’ve come to Sweden in mid-life and intend to retire here and don’t have pension savings in your home country, you might find that you don’t build up enough of a pension to retire comfortably.

If you have any spare cash, then it might be worth saving to supplement your pension. You can see how big your pot is projected to be at the Pension authority’s Min Pension website. 

If you are self-employed you will only automatically be paying into the lowest form of state pension, or allmänna pension, which will not provide for a comfortable retirement, particularly if you only arrived in Sweden later in life. If the surplus or överskott on your company is above a certain amount (49,938 kronor a month in 2023), then it is tax efficient to top up your pension through a pensionförsäkring, as you will already be earning enough to qualify for the maximum allmänna pension. 

But if the surplus is lower than this, then it is more efficient to top up your pension through investing in an ISK or kapitalförsäkring. 

Finally, of course, if you are already paying as much possible into your state, occupational and private pension, and are still have more spare cash than you can spend (lucky you!), it makes sense to save it.

Historically, your savings are likely to grow faster invested than in an ordinary bank account, although the current market is more volatile due to inflation, Russia’s invasion of Ukraine, and supply-chain issues following the Covid-19 pandemic.

This is less likely to affect your savings if you are saving for the long-term (over five years or so), but if you are expecting to need to access your cash in the next few years, you may feel more comfortable saving in an ordinary bank account. 

If you are unsure what to do, it may be wise to contact a financial advisor and discuss your options.

If I have shares and funds held in an account abroad, how do I move them to Sweden? 

Theoretically, free movement of investments is enshrined in the EU’s Maastricht Treaty, but in practice moving shares from a bank or online stockbroker in one EU country to one in Sweden is difficult for a private individual. It is simpler to sell the shares, transfer money and reinvest in Sweden. 

If I have shares and funds held in an account abroad, where are the dividends and profits taxed? 

According to Ann Strömbäck, a tax partner at PWC in Sweden, if you are resident in Sweden, you should pay tax to the Swedish Tax Agency on any income or profits you make anywhere in the world.

“If you are resident in Sweden you are taxable for your worldwide income, so we tax 100 percent of your dividend income in Sweden,” she explained. 

However, when other countries levy a withholding tax on dividends, Sweden will normally give you a tax credit equal to half of the tax withheld abroad. 

“We have double tax treaties giving Sweden the right normally to tax half of the dividend income, or 15 percent,” she said.

Originally written by Richard Orange in May 2021. Updated by Becky Waterton in July 2023.