The Swedish pension reform model: framework and issues

Edward Palmer

No 23086, Social Protection Discussion Papers and Notes from The World Bank

Abstract: This paper describes the recent Swedish reform, and available options on major issues within this reform framework. In June 1994, Sweden's Parliament passed legislation replacing the old defined benefit system, with a combination of pay-as-you-go notional defined contribution (NDC), and a DC privately managed financial account scheme, based on a total contribution rate of 18.5 percent on earnings. The financial account scheme will have a state monopoly supplier of annuities, and, participants can choose, when they make their first choice in the autumn of 2000. If the NDC, and financial account schemes do not reach a minimum level by age 65, and the individual chooses to retire at this age, benefits from these systems will be supplemented up to the guarantee level, determined by Parliament, and financed with a state budget transfer. Life expectancy is factored into the NDC annuity, and together with the financial account system, this innovation helps to shift the risk of an aging society onto workers, while they are still active. There is no maximum retirements age, and the system offers a broad range of options for labor-force exit for older workers. Full, partial, or no earnings from work, can be combined freely with full, or partial annuities from one, or both of the public schemes from the minimum pension age of 61.

Keywords: Pensions&Retirement Systems; Health Monitoring&Evaluation; Information Technology; Youth and Governance; Banks&Banking Reform (search for similar items in EconPapers)
Date: 2000-06-30
References: View complete reference list from CitEc
Citations: View citations in EconPapers (60)

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