As we have been pointing out in recent articles, our Pension System is far from being at its best. For this reason, there is talk of mechanisms that would help reformulate the current model. Sweden has already done this, and today we will talk about how it went.
The problems of the current system
At present, the Reserve Fund and, more generally, the Social Security are at a difficult time, because:
- The numbers are not in as of today
- The outlook for the future is not promising.
We could summarise the difficulties in these three:
- The economic recovery IS creating jobs, BUT these jobs are not being created. new social security contributions are of low amounts, The pay is very low.
- The generation linked to the “baby-boom”The population is very large and highly paid, so their pensions will also be high.
- There is a population ageing that we can see in the transformation of the pyramid: these new pensions become unsustainable without a rise in fertility in Spain.
The models to look to in order to reverse this situation
We are going to focus on the existing system in Sweden, which was reformed in the 1990s (just over twenty years ago); and which experts are talking about as a possible reference for improving pensions in our country.
The old pension system in Sweden
In the 1950s, the now outdated mechanism for setting pensions in Sweden was established, which was based on:
- Folkpension: a universal basic pension
- Plus a supplement, which was linked to previous contributions, known as ATP.
The recession of the 1990s caused a crisis in contributions to the system, and led to a strong sense of need for change.
The Swedish mixed system
The philosophy behind the Swedish Parliament's reform was based on four objectives:
- Decouple the years of contribution from the pension to be received: now they are only based on the total contributions to the system, regardless of whether you have contributed 20 or 40 years. If you, throughout your career, have contributed the same as me, it makes sense for us to have the same pension.
- Redistribution of wealth, with transparent management: ensuring a minimum pension for the less well-off,
- Sustainability of pensions over time: in the past, it was understood that young people were going to bear the cost of pensions, whatever the cost. This was intended to be corrected, because it is unbearable.
- Create a second pillar to support the cost of pensions, helped by private pension managers.
How was the system formulated?
A system of notional accounts was created. These were formed by the 16% of each worker's income, but it is not that they were saved for their future pension, but only the calculation, because these amounts directly cover the pensions of the moment (in line with generational solidarity).
And, in these accounts, the time of contribution is eliminated from the calculation, only the amount matters.
On the other hand, the second pillar consists of a contribution of 2.5% of their income in these funds, which belong to private managers chosen by the State, and from which each citizen can choose their own.
Conclusions on the Pension System
On many occasions, we talk about Scandinavian countries as a benchmark in many aspects: working hours, productivity, etc. This could be another example.
Thanks to this reform, eliminated the rigidity of the previous system. In Spain, the same thing would happen, since by eliminating the obligation to contribute for X years, certain injustices are put an end to, such as having to contribute for at least 2 years out of the last 15; especially with the difficulties of the current labour market.
Our Savings and Investment Department will help you to calculate your retirement pension, as well as having the option of supplementing it with a savings plan or a guaranteed pension plan or mixed.
