Pension Reform in Sweden: Sustainability and Adequacy of Public Pensions

Hanna Aspegren, Jorge Durán and Maarten Masselink

No 48, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

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.

Keywords: Pension reform; Adequacy; Public pension; Occupational pension; Aspegren; Durán; Masselink. (search for similar items in EconPapers)
JEL-codes: H55 J32 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2019-07
New Economics Papers: this item is included in nep-age, nep-dem and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecobri:048

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