Swedes push ITP into DC model
PTK, Sweden’s private sector employees’ trade union, believes that plans for a new defined contribution pension scheme could be finalised by the end of October. A replacement for the current final salary scheme, ITP, has been under discussion since 1994.
“Both employers and employees want a new system”, says Ellen Linder, legal adviser at PTK. “For employers, a defined contribution system would eliminate uncertainties. They want to know how much they will be paying out so they can budget for the future,” she adds.
“And for employees the current final salary scheme is unfair. Salaries may peak well before retirement so at 65 a worker will be earning much less than when he or she was 40.”
PTK, which has a membership of 675,000 workers, is in negotiations with Svensk Naringsliv, the Confederation of Swedish Enterprise, which represents 47,000 companies in Sweden.
When asked why the establishment of a new system was taking so long, Linde explains: “Employers and employees have different ideologies, and it is difficult to please both. And above all a pension system lasts for life. It must be sustainable.”
In May this year, it was rumoured that PTK intended to use the government workers agreement, PA-03, as a template for the new scheme. Under PA-03, government employers will contribute a total of 4.3% of the employee’s salary to a new contribution-based scheme. At the time Svensk Naringsliv strongly disagreed, comparing the 4.3% to their current contribution of 3.5%. Linde dispelled the rumours saying: “it could be less than 3.5% or more than 4.3% - we have not decided.”