The Market for Retirement Products in Sweden
Far-reaching changes in the regulation of financial markets and the organization of public pensions in the 1980s and 1990s transformed the landscape for retirement products in Sweden. First, banking and insurance were extensively deregulated in the...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/10/9912072/market-retirement-products-sweden http://hdl.handle.net/10986/6935 |
| Summary: | Far-reaching changes in the regulation
of financial markets and the organization of public pensions
in the 1980s and 1990s transformed the landscape for
retirement products in Sweden. First, banking and insurance
were extensively deregulated in the 1980s, while the
securities markets experienced major expansion. Insurance
received a large boost from the authorization of unit-linked
products in the early 1990s. Second, the public pension
system was reformed. Survivor benefits for widows were
eliminated from the public pillar in the late 1980s, leading
to a large increase in demand for term life insurance. The
old defined benefit public pension system was replaced by a
notional or nonfinancial defined contribution (NDC) scheme,
while a funded defined contribution (FDC) component was also
created in the public pillar. The four occupational pension
funds that cover the majority of Swedish workers were also
converted into FDC schemes. This paper reviews the
implications of these changes for the Swedish annuity
market. It discusses the regulation of payout options in
Sweden, highlighting the compulsory use of life annuities in
the public pillar and the preference for term annuities in
the occupational funds. It examines the performance of
providers of retirement products, including the PPM, and
reviews the increasing focus on risk-based regulation and
supervision. The paper also emphasizes Sweden's success
in moving in the direction of increased funding and
privatization of old age insurance, while maintaining its
basic character as a highly developed welfare state. |
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