Sweden created a unique retirement savings plan 20 years ago and offers several options for people to decide their own investment portfolio. After all these years, is the Swedish project a success?
KingGame｜KingGame｜KingGame｜KingGame
No matter what form of choice design you take or how many options you offer, the details matter. Seemingly small interventions can have big effects. We now turn to Sweden, where a unique retirement savings plan was created two decades ago, allowing us to clearly see the impact of design details while also having the opportunity to observe changes over time. The jury is still out on whether (or under what circumstances) thrusts last long, but as we shall see later, some thrusts do last quite a long time. The discussion here is a little more detailed, not because I am obsessed with the Swedish savings plan, but because the details can provide important enlightenment in several aspects, including the problem of option maximization and whether the effect of default options is possible Weakening, inert influence, etc.
Defined contribution systems have become increasingly popular in private sector organizations. One reason is that traditional safety-net programs, such as Social Security, usually operate on a "pay as you go" basis, meaning that benefits for retirees are paid by taxes paid by those who are working. Two demographic trends are threatening this system. One is the increase in life expectancy, which means that retirees can live for more years;
Sweden is the pioneer of retirement system, they (after long planning) launched the plan in 2000. Since Sweden's approach is unique, it can provide us with unique inspiration for choosing a design. A little background first, as readers can probably guess, Sweden has a generous social safety net, including retirement savings, with a social security tax rate of 16% of income. Participation in the retirement plan is mandatory, and basically a defined benefit system is adopted. The reform plan to be discussed here is to allocate a part of the social security tax to establish an individual defined contribution account, called the Swedish Premium Pension Plan (Swedish Premium Pension Plan). For convenience, it is referred to here simply as the Swedish Project.
Since participation is mandatory, automatic enrollment or progression is irrelevant here. Our focus will be on other features of the option design, namely the number of options offered by the program, and the design and disposition of default funds. The program has been in place for two decades, so long-term changes in participants' behavior can also be examined. In particular, we'll explore a question that's often difficult to answer: "How long will the thrust last?" At least in this case, some thrusts are a bit like diamonds—they last forever.
If there were one simple word to describe the design of the Swedish project, it would be "option first". In fact, this system is the best example of "option maximization", that is, the idea that the largest number of options should be provided and then let the people decide for themselves; we see policy designers adopt laissez-faire at almost every stage The way.
The program has the following main features:
You might be asking yourself, did this really happen in Sweden? This plan will allow Milton. Friedman is very happy, because he thinks the combination of free access to the market, unfettered competition, and choice is a great thing. But well-informed choice designers may worry that giving the average person so many choices may actually create problems. As we shall see below, such concerns are not unfounded.
As mentioned earlier, the Swedish plan will designate a default fund: AP7 (its composition will be introduced later), and the establishment of this fund also involves other selection designs. Specifically, what status should the government give it? Do you encourage people to choose it, or hope people don't choose it, or what? The designer of this program can provide many options, some of which are listed below:
Participants have no choice: the only choice is the default fund.
Provide default funds, but hope that the public will not choose.