Swedish DB premiums “too high” for older workers

SWEDEN – The Organisation for Economic Cooperation and Development says premiums for defined benefit pensions in Sweden are too high for older workers - making companies reluctant to employ them.

“Premiums for defined benefit occupational pensions are too high,” the OECD says in a report on Sweden’s ageing workforce. “Thus the social partners should aim at reaching agreements in order to lower the cost burden on employers and thereby reduce their reluctance to hire and keep older workers.”

The body says it is “of major importance that less costly and age-neutral schemes are developed”.

The lowering of DB premiums was one of several suggestions the OECD makes to bring older workers into the workforce. Other suggestions included revamping disability pension arrangements and strengthening the eligibility criteria for social insurance.

“In sum, a comprehensive reform strategy is needed to improve employment prospects for older workers,” the OECD says.

The OECD said Sweden has one of the oldest populations of all OECD member countries and that by 2030, almost one
in four Swedes will be over the age of 65. “There is a risk that this will generate large upward pressures on public expenditures, while at the same time provoking acute labour shortages and slower economic growth.”

It says that to maintain an adequate level of social protection without increasing taxes, the employment rate of older workers will have to increase. “This means that the long-term trend to early retirement will have to be reversed.”

It said that the recent reform of public pensions may increase pressure to use disability schemes as a route to early retirement. “Sickness benefits may already have
become a route to early exit from the labour market.”

It added that it is too early to say whether the pension system that Sweden introduced in 1999 will have a positive impact on labour supply.

And it called for a review of the “generous” tax treatment of occupational pensions - which it said are frequently used as an instrument to lay off older workers.

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