How Will Sweden’s New Pension System Work?

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In 1998, the Swedish Parliament passed pension legislation that transformed Sweden’s Social Security system to a Notional Defined Contribution (NDC) plan, that is, a defined contribution plan financed on a pay–as–you–go basis. In addition, the legislature established a second tier of funded benefits. This issue in brief describes the evolution of the new Swedish pension system and discusses its implications for other countries considering pension reform.