A number of pension reforms are needed in order to deliver a sustainable pension system to future Swedish pensioners, including an increase in the retirement age, Swedish union Forena has argued.
Speaking to AP7, Forena head of social policy, Håkan Svärdman, highlighted the “crucial measures” as key in restoring balance to the current system, in particular calling for the same age to apply to guaranteed pensions, target age and LAS age in the future.
The union has also called for an increase in pension contributions from 17.21 to 18.5 per cent, with this increase including future and already earned pension rights.
According to Forena, this would mean see pension income increased by 7 per cent, with the greatest effect on women’s pensions, therefore reducing the need for basic protection through a guaranteed pension, housing supplement or old-age support.
Svärdman explained that the “basic problem” within the current system is the idea that the pension should be “a receipt of work” has been eroded, instead moving a system where everyone receives approximately the same general pension, despite the fact that very different fees have been paid in practice.
He stated that when pension reform was implemented in the country in 1994, the goal was for the pension to correspond to at least 60 per cent of the final salary.
However, he clarified that today, this ambition “only partially corresponds to reality”, with general pension and occupational pensions combined often reaching around 70-75 per cent of final salary.
Svärdman explained that the share of the general pension has fallen “surprisingly fast” from 61 per cent to 47 per cent of the final salary in less than 15 years, warning that if pensions become lower, it will hit municipalities and regions that receive a smaller tax base, with conditions for occupational pensions also effected.
This is because the collectively agreed occupational pensions are negotiable based on an expectation of a general pension of just over 60-65 per cent of final salary, a calculation which Svärdman argues “no longer holds”.
According to Svärdman, several industries have already negotiated their agreements to compensate for the pension fall, with the opportunities for this are greater in the industrial rather than service sector.
He warned that this in turn, can mean greater differences in future occupational pensions, especially between women and men.
Forena has proposed the reforms as a way to return to the original principle of a general pension of 60 per cent of final salary, acknowledging that whilst some will be “relatively easy to implement”, others will require more thorough consideration.
Svärdman clarified however, that an increase in the retirement age and pension contributions are “absolutely crucial measures” in restoring the system, emphasising that the real challenge will be in updating a system that is not connected to tax.
He explained that an increase in pension contributions without a tax reorganisation would reduce the wage space for employees, arguing that a cost-neutral increase, potentially offset by a lower general wage tax for instance, would be preferable.
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