Conceptualizaciones sobre evaluación por subdimensiones

The Swedish pension system was reformed in 1998. Prior to 1998, the pension system had been in place for 40 years15_{. The old age pension (which was agreed to in} parliament in 1958 and enforced in the early 1960s) was a pay-as-you-go system which included a universal pension supplemented by an earnings-related pension (ATP). The system provided a full pension based on the earnings of a worker’s best 15 years and after contributing for 30 years, favouring particularly high earners. The overall replacement rate was between 55-70 per cent (Barr, 2013). By the 1980s, Sweden experienced financial pressures and hence introduced over time a reformed pension system. The new system was aiming to increase work incentives by making the pension system actuarially fair, as well as provide a basic old-age income for all (Palmer & Wadensjö, 2004). In essence, the new system had to offer an insurance system-type arrangement (i.e. DC) and a notion of redistribution.

Ultimately, the new system has been consisting of three main parts:

• The income pension (inkomstpension) is a notional defined contribution (NDC) PAYG pension that replaced the ATP pension scheme and flat-rate basic pen- sion. Under the NDC arrangement the contributions are notionally accumulated – whereby the value of contributions and thereby pension assets are based on a rule rather than investment returns (as it would be under a DC only system). Under this rule, the notional accumulation which is credited to an individual notional account is increased in line with a notional interest rate, which is cal- culated by the government encompassing earnings and price inflation16_{. At the} time of retirement the inkomstpension is payable in form of an annuity.

• The premier pension (premiepension) is a mandatory individual DC investment account arrangement. This component provides individuals the option to choose up to five pension funds, among the approximately 800 available funds (consist- ing of insurance companies, banks as well as “newcomers” – which are approved

15_{Prior pension systems existed in Sweden (including an occupational pension for state employees}

in the 18th century, and a people’s pension –folkpension – in 1948). But these will not be further addressed within the scope of this thesis.

16_{A detailed overview on how the notional interest rate is calculated can be found in literature}

from the Swedish Pensions Agency as well as the insurance companies (forsakringskassen), but is beyond the scope of this thesis.

and supervised by the Swedish Financial Inspection Authority), to provide ad- ministration services to their premier pension savings. Expectations are that the premier pension funds will be corresponding to 25–30 per cent of GDP when the system reaches maturity. As such, they will be acting like a buffer fund to safeguard against unforeseen developments during a crisis which may be impacting the PAYG system.

• A guarantee pension (garantipension) which applies to individuals with low or no earnings and therefore a low pension from the income system.

The guarantee pension is financed through the state, whereas the income and premier pensions are financed through total contributions of 18.5 per cent of earnings, whereby 16 percentage units of the fees are paid into the PAYG system, and 2.5 percentage units into the individual DC accounts. Contributions are shared relatively equally between employer and employee. Certain years of care, study and disability yield pen- sion credits alongside earnings, which are financed by the state (Palmer & Wadensjö, 2004).

The pension scheme was gradually implemented starting in 1999 and fully applied in 2003. Those born in 1938 have started to receive part of their pension from the new system, whereas those born in 1954 or later will be based entirely on the new system (Lindquist & Wadensjö, 2011). The DC pension system is complemented by occupational pension plans. These are comprised of four main plans: for gov- ernment employees (PA 03), for those re-employed by counties and municipalities (KAP-KL/AKAP-KL), for white-collar workers in the private sector (ITP), and for blue-collar workers in the private sector (SAF-LO). These collective schemes provide mandatory coverage to more than 90 per cent of employees in Sweden, providing approximately 10 per cent in addition to the income pension (Lindquist & Wadensjö, 2011). Self-employed can opt to participate in the system, whereas other individuals (for example part-time employees on very short working hours and those outside of the labour market) are not covered by the occupational pension plans. Occupational pension plans are collectively negotiated and managed. Private sector schemes are DC plans, whereas public-sector schemes combine components of DB and DC (Lindquist & Wadensjö, 2011). For the scope of this thesis, more emphasis is paid to the ITP arrangement (Industrins och handelsn tilläggspension). ITP is undergoing a transition

from DB to DC. Members born 1978 and earlier are in the ITP 2 scheme that provides benefits on a final salary DB basis. While all others are in the entirely DC arrange- ment called ITP1, introduced in 2007. The ITP1 set-up is financed through employer contributions which consist of 4.5 per cent on income below the statutory ceiling and 30 per cent on income above that ceiling. Part (approximately one half) of the contribution is allocated to fixed annuity products and the other half to either fixed annuity products or unit-linked products (Anderson, 2015). Individuals can choose the pension products from the different providers.

While the ITP terms and conditions dominate the pension market some industries may have other collective pension arrangements than ITP, but benefits are alike. Due to the employer contribution set-up of the ITP system (and those occupational pension plans that mirror ITP terms and conditions), particularly high earners benefit from this provision ensuring closer replacement rates to their income levels during working period (Diamond, 2009; Lindquist & Wadensjö, 2006).

Due to the collective nature of the Swedish system (including occupational pensions), the crisis has not had large implications on the overall funding levels (Sundén, 2009). Instead, socio-economic and demographic factors are considered to be challenging, though are beyond the scope of this thesis.