Improving Sweden’s Automatic Pension Adjustment Mechanism

The brief’s key findings are:

• The economic crisis has provided a ‘stress test’ for many pension systems.

• In Sweden, the crisis triggered an automatic ‘brake’ to restore financial balance and revealed two problems with the brake’s design:
• it can favor workers over retirees; and
• it can result in large shocks for retirees.

• In response, the brake could be modified to prevent unintended gains for workers and better insulate retirees from risk.