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ARCHIVED - Spain considers adopting Swedish pension model
Employers in Spain are in favour of switching to Sweden’s mixed contribution system
Rising costs in everything from groceries to fuel have understandably led to people trying to pinch the pennies wherever possible, and the Spanish government’s proposal to reform the state pension system by increasing contributions has naturally led to a flood of criticism. The upshot is that the Circulo de Empresarios, a group which brings together several business leaders in Spain, has suggested this week that the country adopt a model similar to that which is used in Sweden.
The proposal, submitted on Monday November 22, suggests delaying retirement age to 70 years (it’s currently 66) and implementing a model of ‘notional accounts’ that promotes private savings plans to guarantee the sustainability of the system.
What is the Swedish pension model?
Firstly, it combines public and private contributions to pensions, so that retirees receive cash based on what they contribute during their working life overall. Because of this, there is no set retirement age; a person simply decides themselves whether they can afford to stop working based on how much their pension scheme has accumulated.
This system was first legislated in 1994 and has remained one of the most successful models in Europe since then.
Another novel idea is adopting the so-called ‘Austrian backpack’; a system whereby an individual fund is created for each employee and filled with monthly contributions of their gross salary. This could then be used to face contingencies such as dismissal or as a pension supplement.
The president of the business group, Manuel Pérez-Sala, has slammed the government’s plan to collect 41 billion euros over the next 10 years to ensure that there is enough cash in the kitty for retiring baby boomers, insisting that “raising contributions and taxes delays economic recovery and hurts employment”.
The group’s proposal aims to set a retirement age ranging between 68 and 72 years, with a series of incentives and penalties. If this system were adopted, those who retire before the age of 70 would lose 15% of their pensions while people choosing to work until they are 72 would benefit from bonuses of up to 20%.
"If we do not want to reduce the amount of pensions we have no choice but to delay the retirement age. Maintaining the current pension system without delaying the retirement age is mathematically impossible", Pérez-Sala concluded.
Image: Archive
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