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Titled: Analysis of the Swedish pension system – Part one Get the Personal category RSS Feed

Analysis of the Swedish pension system – Part one

Article Summary: The ever increasing number of elderly people along with tendencies for early exits from employment is going to result in much discussion about the pension systems in industrialized countries in the future. Governments and other international organizations such as the European Union and the World Bank are getting more and more interested in the design of different pension systems.

In this article series I will attempt to elaborate on the complicated contractual and public pension system in Sweden.

The ever increasing number of elderly people along with tendencies for early exits from employment is going to result in much discussion about the pension systems in industrialized countries in the future. Governments and other international organizations such as the European Union and the World Bank are getting more and more interested in the design of different pension systems.

Their main interest lies in the public pension systems – pension that is within the social security sector. But the public pension system is only a part, obviously a quite important part, of the complete pension system. In addition to the public pension system, there are also different kinds of pensions like contractual pension, avtalspension, and private pensions. The shapes of these different kinds of pensions vary from country to country, and it is difficult to systemize the description of the countries’ different pension systems. To do this, one commonly uses different collective concepts. The most common are: pillars, tier and regimes. These stand for three different structural principles which individually increase knowledge about the total structure of the pension system. Here follows a description of the principles.

The first principle is to view the pension system as if it is resting on different pillars: the public pension system, contractual pension and private pensions. The strength of the different pillars varies from country to country and their relative strength also varies over time. There are correlations between the different pillars as well – if one is weakened another gets strengthened and vice versa. On the other hand, other times a parallel weakening or strengthening may be taking place.

The second principle is to view the pension system as being built with layers. The bottom layer consists of the public pension, above that is the contractual pension and on the third layer is the private pension. Everyone is not comprised by all layers in the complete pension system. Most commonly everyone or almost everyone is comprised by the public pension system. Smaller or larger parts of the population are comprised of contractual pensions (), while only a small part have arranged for private pension insurances. It is easy to discern why changes in one layer may cause counteracting changes in a different layer. There are many large differences concerning the buildup of pension systems between countries. In some cases, different employment groups may be exempt from public pension completely, relying solely on contractual pension. This pertains to governmentally employed in Germany for example.

The composition of the collective pension varies greatly between different income-groups in Sweden. As a rule, people with really low wages or none at all, collect their pension from the public pension system. People with low or medium wages collect most of their pension from the public pension system and a smaller part from contractual pension. For those who have had very high incomes, a large part of their collected pension comes from contractual pension. The private pensions play a large role for those who have the highest income.

Article Source: http://www.upublish.info

About the Author:
Robb Stark
Robb is writing about the history of the pension in Sweden, with the upcoming of the "avtalspension and ITP.