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greater impact on the premium than when the retirement age is further
away.
In Sweden, there are four main occupational pension agreements
negotiated between the parties on the labour market. Usually, the
collectively agreed benefits act to complement the corresponding
benefits of the national old age pension system. The agreed benefits
are most important for those with relatively high work income; that
is, for those with an income that is above the cap in the old-age
pension system. In three of the agreements, which cover white-collar
workers in the private sector, central government employees, and
local government employees, the occupational pension is partly a
final-salary pension scheme (defined benefit pension).
The cost of the collectively agreed pension benefits is levied on the
employer. While the legislated pay roll tax is a fixed percentage of
the payroll, the premium costs of the occupational pension have a
different design. First, the costs vary over different parts of the labour
market, depending on which of the pension agreements that apply in
that sector. Second, the pension contributions for defined benefit
pensions are progressive and depend on the employee's age and
salary.
The premium design implies that the wage costs can therefore be
substantial for an employer that has a relatively large number of older
well-paid employees, in comparison with those for an employer with
a younger workforce. The higher wage costs can give employers an
incentive to offer older employees an early retirement pension, in
order to enable them to replace older employees with younger ones.
In summary, the analysis shows that the construction of the
occupational pension agreements can create barriers to raising the
retirement age:
1.
The agreements assume that there is a normal retirement age
at 65.
2.
It may be disadvantageous for employees to reduce working
time during the years immediately before retirement, as the
benefit is largely based on the final wages.
3.
The design of the pension agreements is likely to discourage
labour mobility, as the cost of pension benefits to a high
degree will be is levied on the final employer.
