The Complexity of the Occupational Pension System

Johannes Hagen Mikael Elinder

We are living longer and longer after we have finished working. Remaining life expectancy at 65 years of age has increased by 5 years over the last 50 years. We can now expect to spend over 20 years in retirement, while for some of us it will extend to over 40 years. The years we spend as retirees constitute a larger and larger part of our lifetime. In order to maintain financial security after retiring, we now need to put aside a larger part of our lifetime earnings as pension savings, either through the public or occupational pension system, or through private savings.

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The complexity of the occupational pension system has made it difficult for us to understand what our financial situation will be during retirement. A rational saver needs to obtain a good insight into how the different parts of the pension system interact with one another.

As the responsibility for pensions has been reassigned from the government to the individual, the number of choices has increased. Pension savers have many options that might affect their future pension in different ways. More freedom to decide over one’s pension savings is reasonable when the saver assumes more risk, but it might also increase the complexity of the pension system.

For high-income individuals, the occupational pension makes a large contribution to their pension. For low-income individuals, the occupational pension contributes with a small, but important, part of their pension. It is therefore important for all savers, independent of their income level, to understand the occupational pension system. However, the current system makes it difficult for savers to understand how large their pension will be in the future. The occupational pension is very complex, as implied by the title of this report. In this report, we seek answers to several questions related to the complexity of the occupational pension system.


Johannes Hagen, PhD and Lecturer in economics at the Jönköping International Business School, Jönköping University, and Mikael Elinder, Associate Professor and Lecturer in economics at Uppsala University and researcher at the Research Institute of Industrial Economics.

This report is part of the research program “New Challenges for the Pension System”. The program takes an overall perspective on the pension system and deals with questions that concern both the occupational pension system and the state pension.