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The market for retirement products in Sweden

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  • Palmer, Edward

Abstract

Far-reaching changes in the regulation of financial markets and the organization of public pensions in the 1980s and 1990s transformed the landscape for retirement products in Sweden. First, banking and insurance were extensively deregulated in the 1980s, while the securities markets experienced major expansion. Insurance received a large boost from the authorization of unit-linked products in the early 1990s. Second, the public pension system was reformed. Survivor benefits for widows were eliminated from the public pillar in the late 1980s, leading to a large increase in demand for term life insurance. The old defined benefit public pension system was replaced by a notional or nonfinancial defined contribution (NDC) scheme, while a funded defined contribution (FDC) component was also created in the public pillar. The four occupational pension funds that cover the majority of Swedish workers were also converted into FDC schemes. This paper reviews the implications of these changes for the Swedish annuity market. It discusses the regulation of payout options in Sweden, highlighting the compulsory use of life annuities in the public pillar and the preference for term annuities in the occupational funds. It examines the performance of providers of retirement products, including the PPM, and reviews the increasing focus on risk-based regulation and supervision. The paper also emphasizes Sweden's success in moving in the direction of increased funding and privatization of old age insurance, while maintaining its basic character as a highly developed welfare state.

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  • Palmer, Edward, 2008. "The market for retirement products in Sweden," Policy Research Working Paper Series 4748, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4748
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    References listed on IDEAS

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    1. David McCarthy & Olivia S. Mitchell, 2004. "Annuities for an ageing world," Chapters, in: Elsa Fornero & Elisa Luciano (ed.), Developing an Annuity Market in Europe, chapter 2, pages 13-48, Edward Elgar Publishing.
    2. Edward Palmer & Eskil Wadensjö, 2004. "Public Pension Reform and Contractual Agreements in Sweden: From Defined Benefit to Defined Contribution," Chapters, in: Martin Rein & Winfried Schmähl (ed.), Rethinking the Welfare State, chapter 8, Edward Elgar Publishing.
    3. Jeffrey R. Brown & Olivia S. Mitchell & James M. Poterba, 2000. "Mortality Risk, Inflation Risk, and Annuity Products," NBER Working Papers 7812, National Bureau of Economic Research, Inc.
    4. Edward Palmer, 2002. "Swedish Pension Reform: How Did It Evolve, and What Does It Mean for the Future?," NBER Chapters, in: Social Security Pension Reform in Europe, pages 171-210, National Bureau of Economic Research, Inc.
    5. Jeffrey R. Brown, 2000. "How Should We Insure Longevity Risk In Pensions And Social Security?," Issues in Brief ib-4, Center for Retirement Research.
    6. Robert Holzmann & Edward Palmer, 2006. "Pension Reform : Issues and Prospects for Non-Financial Defined Contribution Schemes," World Bank Publications - Books, The World Bank Group, number 6983, April.
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    Cited by:

    1. Gregorio Impavido, 2008. "Efficiency and Performance of Bulgarian Private Pensions," IMF Working Papers 2008/268, International Monetary Fund.
    2. Blake, David, 2009. "NDC v FDC: Pros, cons and replication," MPRA Paper 33752, University Library of Munich, Germany.
    3. Vittas, Dimitri, 2011. "The mechanics and regulation of variable payout annuities," Policy Research Working Paper Series 5762, The World Bank.
    4. Jörg Neugschwender, 2015. "Pension Institutions and Income Inequality across European Societies: Denmark, Germany, Sweden, and the United Kingdom," LIS Working papers 627, LIS Cross-National Data Center in Luxembourg.

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    Keywords

    ; Debt Markets; Emerging Markets; Pensions&Retirement Systems; Insurance Law;
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