Pirkko Juntunen asks when the Pensions Working Group will finally come to any conclusions. The answer seems to be ‘nobody knows, but not any time soon’

The Swedish Pension Working Group (PWG) is unlikely to reach any decisions or conclusions any time soon, judging by its recent inability to even schedule a meeting to set an agenda for discussing reforms. 

After several delays, in March the group met for the first time since spring 2014, but there were no expectations of any decisions in what is likely to be a very lengthy process. Two previous attempts to meet were delayed because of disagreements and a last-minute cancellation by the chair, Annika Strandhäll. She is the new minister for Social Security in the minority red-green government. The social security minister traditionally chairs the PWG.

One of the bones of contention was the composition of the five-party group, which dates back to the 1990s. The political landscape in Sweden has changed since then. In the September 2014 general election the right-of-centre Sweden Democrats gained almost 13% of total votes, making it the third-largest party.

Strandhäll invited the Green Party to join the first post-electoral meeting of the PWG in November 2014, but without consulting the other members. This resulted in the other parties walking out in protest, further stalling progress. 

This was later resolved by the December Agreement, which made the Green Party a member of the PWG. The agreement was the result of the minority government’s Budget being voted down by the opposition and the Sweden Democrats, which hold the balance of power in the Riksdag, Sweden’s Parliament. Prime minister Stefan Löfven said he wanted the election to be run again but later made a deal with the opposition.

Last year was the 20th anniversary of the 1994 pension reform, which created a new pension system. Since the reform which established the country’s mandatory defined contribution system (PPM) and a new structure for the country’s buffer funds (the AP funds), efforts to improve the system have been ongoing. 

Much of the criticism over the years has been directed at the prescriptive investment guidelines for the buffer funds, which many argue should be abolished in favour of Anglo-Saxon style ‘prudent-man’ principles and the reduction of the number of funds available within the PPM.

At a glance

  • Five separate expert enquiries form the basis of further reform.
  • The Pensions Working Group agreed to change to the original agreement including buffer fund structure, longer working life, a review of the premium pension system and moderating swings within the automatic balancing mechanism.
  • An enquiry into reforming the DC system is expected in September 2015.
  • A change in government in September 2014 has stalled much of the discussion.

During the past two years five separate expert groups have been examining the pension system, focusing on retirement age, the premium pension system, the structure of the automatic balancing mechanism, the structure of the buffer funds and issues with consultants advising on premium pensions. 

Before the 2014 elections, there was an agreement within the five-party PWG to find solutions and reforms based on the results of the five expert enquiries.

As a result of the general election in September 2014 and the change in government from a centre-right alliance to a red-green coalition, discussions initially stalled. Further problems on the road to reform are likely, as the now six parties have to find a solution that is palatable to everyone. Some of the contentious issues include raising the retirement age from 61 to 63 by 2017 and allowing people to work until the age of 69, rather than the current upper-age limit of 67. 

The PWG had its first meeting in December 1991 to discuss reforming the country’s pension system. The parliamentary group originally consisted of the five largest political parties at the time. The Social Democrats on the left of the political spectrum and the Moderate Party, Centre Party, Liberal Party and Christian Democrats on the right of centre. It was agreed then that any changes would have to be agreed by the five parties, or that, if any new parties were to be let in, they would have to go along with the previous agreements. 

The initial idea behind the PWG was to reach an agreement on how to reform the country’s pension system and then implement it. Following the new law – which, among other things, created the country’s mandatory defined contribution system and buffer funds – the group remained in place. Since then, the group has been viewed as the steward of reform, meeting regularly to improve the system and commission studies.

A short answer to the question as to when the PWG will reach its conclusions is that ‘nobody knows and definitely not any time soon’. Strandhäll has publicly stated that the way forward is continued discussions and, possibly, further enquiries. 

In July 2014, an enquiry into how reforming the premium pension system would be best achieved (see panel ‘Premium pension system reforms’) was agreed, but the government has yet to announce who will be chairing the inquiry, which is expected to present its findings in September.

Decision-making by consensus does have its advantages in that all parties feel they have an input into any future change, and all can claim they have gained something.

However, many believe the PWG, despite being multi-party, stifles public debate and understanding of any changes due to its relatively closed nature.