Pension Reform in Sweden and Implications for Japan

Sweden changed its pension system drastically in 1999. The new Swedish pension system is a pay-as-you-go system, but it is a defined contribution pension in principle. This new Swedish pension system is called the Notional Defined Contribution (NDC) pension system. As pension benefits are strongly linked to pension contributions, it is thought that the new Swedish pension system does not lead to intergenerational inequality. Additionally it is thought that the new Swedish pension system has the advantage of sustainability because pension benefits fluctuate according to economic growth rate and longevity. The purpose of this paper is to describe the characteristics of the new Swedish pension system and consider its implications for the Japanese pension system. 1.