Abstract
Ageing, with increases in the old-age dependency ratio, puts a strain on pension systems organised as a pay-as-you-go system. The major part of the Swedish pension system is a pay-as-you-go one, but the specific Swedish design mitigates much of this strain. It is maintained to be financially stable. The question asked in this chapter is whether the system will be politically as well as financially stable in the future. The design is described and analysed with respect to sustainability. Political sustainability is analysed from the viewpoint of fairness, assuming that a fair system will be more stable than a system that is perceived not to be fair. The analysis of fairness is divided into fair outcome and fair procedure. Outcome varies much with chosen measure. The procedure has it draw-backs, but seems fair enough provided a well-functioning labour market.
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Notes
- 1.
- 2.
SOU 2006, p. 86 shows that the number of individuals being supported by sickness insurance, unemployment insurance and disability insurance has increased from around 11% in 1970 to 21% in 2005. E in Table 4.1 is calculated based on the assumption that 20% have been and will be supported by these systems.
- 3.
There are a couple of minor exceptions. Full contribution is not paid on incomes below 42.3% of one price-related base amount and not on incomes above the ceiling (7.5 price-related base amounts). These incomes do not give pension credits.
- 4.
The income base amount is changed once a year in response to changes in the income index.
- 5.
The price base amount, pba, is used for price-indexing the benefits. It is adjusted once a year in response to inflation (consumer price index). In 2008 pba = 41,000 SEK; 1.26 = 51,660 SEK.
- 6.
Note, that the guarantee pension is price indexed and not subject for this change.
- 7.
Könberg et al. (2006) describe the political process and the different aspects taken into consideration during the work on the proposal.
- 8.
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Acknowledgments
I thank Tommy Bengtsson, Andreas Bergh, Per-Gunnar Edebalk, Åsa Hansson, Carl Hampus Lyttkens and Kirk Scott for good comments on earlier drafts.
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Kruse, A. (2010). A Stable Pension System: The Eighth Wonder. In: Bengtsson, T. (eds) Population Ageing - A Threat to the Welfare State?. Demographic Research Monographs. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-12612-3_4
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