SWEDEN - Perhaps the most important change in the Swedish pensions scene is that participants in new blue-collar contractual schemes can take advantage of the general performance of Swedish and other equity markets, and have been given considerable freedom of choice over their own portfolios, according to new research.
‘Policy approaches to promote private and occupational old-age provision in Sweden’ is a paper by Edward Palmer, prepared for the Bertelsmann Foundation as part of a multi-country project examining old-age provision in different nations.
But, Palmer adds: “Some would claim, however, that Sweden has gone too far in offering participants freedom of choice in investments. The half-way point would be to allow freedom of choice among a limited number of index portfolios and to offer standard annuity products, as in the present Swedish public and contractual schemes.
“This would have the advantage of providing a ‘market expected’ return on accumulation and an annuity at lowest cost. The Swedish scheme operates at low cost now compared to many comparable schemes in other countries, but the cost advantage could become even greater by offering even more limited choice.”
Palmer also concludes that the system would operate more efficiently if private and public pensions administrative machinery were combined: “If one had been designing the overall set-up from the beginning, it would undoubtedly have been claimed that two administrations for essentially the same product is too costly. A single scheme would have cost less.”
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