The Swedish pension system consists of three pillars: the state pension, an occupational pension, and private savings. The special feature: 2.5 percent of the state-organized pension contributions are invested in the stock market. Each insured person can decide for themselves whether to choose their own fund or use the Swedish state fund.
The Swedish state fund invests in global equities, among other things, and has achieved an average double-digit return in recent years. The risk of market fluctuations is cushioned by a life-stage-dependent investment mix: the closer retirement approaches, the more cautiously investments are made. “Most people understand little about the stock market, so it helps that the Swedish state makes a kind of preselection of funds and I only have to decide whether I want a lower or higher risk,” said 72-year-old pensioner Torbjörn Ersson.
Philip Berlin Jarhamn of the Swedish Pensions Agency explained that younger generations hardly ever choose their own funds anymore – and that is perfectly fine. Those interested in the stock market can opt for one of the recommended funds. Many young Swedes trust the system: “I trust that the state knows what it’s doing,” said one woman. Another expressed slight skepticism: “You do hear from time to time that the money might not be enough to live on in the future, which does make you a bit nervous.”
The Swedish model does not solve all pension problems. The retirement age is automatically adjusted to life expectancy and has recently risen to 67. The largest part of old-age provision remains wage-dependent. Nevertheless, the stock market can strengthen the statutory pension – but it does not eliminate the challenges of an aging society.
Source: Tagesschau
