The Swedish Pensions Agency (Pensionsmyndigheten) is calling on the government to set up an official inquiry into reform of the state pension system, saying the original principle that the pension is linked to an individual’s lifetime income has now been lost.
Launching a report today entitled ’A New Pension System?’, Ole Settergren, head of analysis at the agency, said: “A basic principle when the pension system was created was that lifetime income should determine the size of the pension.
“But the changes introduced in recent years have led to Sweden in practice having a pension system which for a large group provides a similar income from the general [state] pension system, regardless of lifetime income,” he said.
In 2020, according to the agency, just over three in 10 pensioners had some tax-financed pension benefit, and that proportion had now grown to seven out of 10.
“Since theory and practice now differ so significantly, there is good reason to investigate the pension system,” Settergren said.
The report is the final one in a series the agency launched in November, aimed at contributing to a discussion about possible options for the pension system.
In the final report, the pensions authority said the various parts of Sweden’s public pension system had changed in recent years. They had become more numerous and they also now contradicted each other – and did not always help the groups they were meant to.
Since pension schemes were very long-term commitments, it said, the principles of the system had to be clear and long-term so individuals could predict the effects of different life choices.
The pension system technically worked, the report said, but had fundamental flaws.
“Looking at the entire public pension, Sweden has a system which for large groups of pensioners is more reminiscent of a national pension system with equal pension for all than an income-based system,” the agency said.
Were the purpose of the design primarily to counteract poverty, the agency said that today’s pension system and basic protection was constructed in an unnecessarily complicated and expensive way.
“If a basic pension alone is to be paid to pensioners, then it is simpler and more efficient to pay out just one pension that is equal for all,” it said.
The authority, which presents two alternatives for the pension system in its report, said a starting point for a public inquiry should be deciding which goals and principles should apply to the pension system.
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