New Challenges for the Pension System

The Swedish pension system faces several large challenges. An ageing population puts upward pressure on the retirement age. At the same time, the number of poor retired people is expected to increase. How can the pension system as a whole provide security for the individual and the right incentives for a longer working life?

The project takes a holistic perspective of the pension system and deals with questions that concern both the occupational and state pension.

Challenges for the Pension System

Both the state pension system and the occupational (employer-funded) pension system have undergone reforms that have strengthened the relationship between pension and lifetime income. These reforms have also lead to an increased possibility for individual choice. Yet the pension system faces new challenges despite the implemented reforms.

Numerous demographic shifts and systemic changes will affect the functioning of the pension system. The increased average life expectancy will put downward pressure on pension levels. The general pension system and the occupational pension systems interact with each other, and with the tax and subsidy system as a whole. Changes in pension levels might thus have consequences far beyond the pension system. People have also become increasingly mobile, relocating across national borders. In contrast, the pensions systems could be seen as designed on the implicit assumption that future retired people will have worked in Sweden during their whole working life.

Research questions

• A longer working life would reduce the pressure on the future pension levels. The relationship between the pension system and the length of working life, however, also works in the other direction: the pension system might affect the length of the working life. The relationship between the length of the working life and the pension system is an important question to analyse.
• More people, both native-born Swedes and immigrants, will have worked abroad during part of their working life. This means that the Swedish income-related pension will be lower for those individuals. In certain cases, this is compensated for by pensions from other countries. People who remain outside the Swedish labour market for long periods of time receive a low income-related pension. Are there any reasons to consider changes in the pension system based on these situations?
• In order to be politically stable, the pension system must be considered legitimate. What is required to guarantee the legitimacy of the pension system?

Project Manager: Anna Hasselqvist Haglund.