The Swedish pension reform and its aftermath
by Patrik Marier
Increases in life expectancy, low birth rates, low economic growth and volatile financial markets have turned pension policy into a prominent public issue in many industrialized countries. In recent years, all OECD countries have introduced pension reforms to ensure the sustainability and, to a lesser extent, preserve the generosity of earlier commitments.1
Canada has not escaped these trends. Despite the 1997 reform that restored financial credibility to the Canada/Quebec Pension Plan (C/QPP) system by nearly doubling the required payroll tax rate, ongoing pension discussions have been occurring at both federal and provincial levels to address current shortcomings. The declining coverage of occupational pensions in the private sector is the primary concern. This has led to numerous debates on whether the Canada Pension Plan ought to be expanded or whether alternative solutions, such as the creation of a new private savings vehicle, should be implemented.
To cast light on these questions, I look at how Sweden has managed to reform its pension system in the past 20 years.2 In the field of social policy, many comparative analyses use Sweden as an explicit or de facto benchmark. The latest Swedish pension reform has featured prominently in numerous comparative social policy studies.3 It was also quickly embraced by the World Bank, which facilitated its diffusion across numerous countries such as Poland and Latvia.4
A social achievement
The introduction of a mandatory public, earnings-related pension scheme (ATP) in Sweden in the 1960s came after a lengthy and bitter political battle, which included an inconclusive national referendum that resolved nothing since citizens had three options. Two general elections followed. Eventually, one vote in Parliament, by a Liberal Party maverick from a blue-collar district in Gothenburg, tipped the balance in favour of the Social Democratic proposal.5 Adoption of the ATP came to represent the pinnacle of social achievement for many Swedish social democrats.