The speedometer head takes it's data from the transmission output. It has to know how many RPM's the driveshaft is making to determine the speed to be displayed. Regardless of which gear you're in, it should display the correct speed.

Here's a theory: What if your transmission control system (which tells the trans when to shift) gets some of its data from the same source as the speedometer? The speed never registers as more than 40 mph, so the trans thinks it never has to shift into a higher gear.

Try to determine if your car uses a computerized control that gives both speedometer output and also controls the trans shift points. If so, you'll probably have to replace the control unit.

I'm sure you'll get good advice from others here, but I'd recommend having a Volvo dealer run a diagnostic for the problem. They should be able to pinpoint the error and then you'll know what needs to be done to correct it.

It may be nothing more than a loose or dirty connection...

Good luck! Steve