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Pension Reform in Sweden: Sustainability and Adequacy of Public Pensions

Author

Listed:
  • Hanna Aspegren
  • Jorge Durán
  • Maarten Masselink

Abstract

The Swedish pension system was among the first to shift to a system of notional accounts. The aim was to render it fair, transparent, and sustainable and the reform enjoyed a broad consensus across the political spectrum. The reform was radical and complemented the public pension with an occupational pension. In addition, while the public pension remained pay-as-you-go, it became a defined-contribution scheme: contributions are fixed and benefits are later computed as a function of these contributions and life expectancy. This paper takes stock 20 years after the reform. It argues that the reform has rendered the system fiscally sustainable and politically stable but raises concerns about benefits' adequacy because the cost of ageing is shifted onto pensioners. Substandard pensions may lead to ad hoc interventions that go against the aim of automatism/transparency. These adjustments may be seen as hidden costs that could ultimately put pressure on the very sustainability the new scheme is supposed to guarantee.

Suggested Citation

  • Hanna Aspegren & Jorge Durán & Maarten Masselink, 2019. "Pension Reform in Sweden: Sustainability and Adequacy of Public Pensions," European Economy - Economic Briefs 048, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecobri:048
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    References listed on IDEAS

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    1. Josep Pijoan-Mas & José-Víctor Ríos-Rull, 2014. "Heterogeneity in Expected Longevities," Demography, Springer;Population Association of America (PAA), vol. 51(6), pages 2075-2102, December.
    2. J. Ignacio Conde-Ruiz & Clara I. González, 2016. "From Bismarck to Beveridge: the other pension reform in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(4), pages 461-490, November.
    3. World Bank, 2005. "Notional Accounts : Notional Defined Contribution Plans as a Pension Reform Strategy," World Bank Publications - Reports 11244, The World Bank Group.
    4. Tsang, Eric W. K., 2014. "Old and New," Management and Organization Review, Cambridge University Press, vol. 10(03), pages 390-390, November.
    5. Karen M. Anderson, 2005. "Pension Reform in Sweden: Radical Reform in a Mature Pension System," Chapters, in: Giuliano Bonoli & Toshimitsu Shinkawa (ed.), Ageing and Pension Reform Around the World, chapter 5, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Pension reform; Adequacy; Public pension; Occupational pension; Aspegren; Durán; Masselink.;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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