Sweden 2011

Sweden’s retirement income system was reformed in 1999. The new system, which applies to people born after 1953, is an earnings-related system with notional accounts. The overall system is in transition from a pay-as-you-go system to a funded approach. There is also an income-tested top-up benefit which provides a minimum guaranteed pension.

The following table shows Sweden’s position when compared to the 15 other countries and some of the indicators that either scored relatively well or poorly

The overall index value for the Swedish system could be increased by:                                                                                                                                            

• announcing an increase in the state pension age to reflect increasing life expectancy
• encouraging employee contributions into employer sponsored plans, as well as private savings
• improving tax incentives for employee contributions
• requiring annual information about the pension plan as a whole to be provided to plan members
• introducing arrangements to protect all the pension interests of both parties in a divorce

The Swedish index value fell from 74.5 in 2010 to 73.4 in 2011.  The main reason is the significant reduction in the net replacement rate as calculated by the OECD.