Furthermore, Sweden’s experience indicates that, even in the more developed economies, the conversion to financial pension schemes can contribute to developing the financial market. The financial defined contribution PPM scheme within the public mandatory system was modeled after unit-linked insurance, providing the opportunity for individuals to make their own portfolio choices during both the accumulation and payout phases. Private individual voluntary and occupational group insurance also offer unit-link products as an alternative to traditional insurance, an alternative that has become a popular product in recent years. The growth of the PPM and the private unit-linked market has in turn pushed the growth in the number of funds available in the market. At the same time the entrance of the PPM helped to put a focus on fund charges and, more generally, administration fees.

In spite of the large number of companies now offering funds in the PPM system, this study reveals that the seven largest Swedish based insurance companies manage the majority of the PPM assets not held in the default fund. The same companies account for almost all the occupational and private insurance business. A conclusion is, then, that despite the large number of insurance companies and fund managers in the Swedish market, the market is dominated by only a few companies. Of course, the mere fact that there are around 40 insurance companies and over 75 fund managers doing business in Sweden is a healthy sign and suggests that despite the dominance of the larger groups many companies still operate successful businesses within this environment.

The analysis in this study of data on the sources of income of pensioners shows that both occupational and private insurance provide an important source of income in the earlier years of retirement for current pensioners. Sweden has no data on the distribution of insurance benefits by types of products. The aggregate data suggest, however, that 5 and 10 year withdrawals of occupational and private voluntary benefits are the preferred options. Also, the data indicate that life annuities are not important income sources for present older pensioners. However, this may reflect the fact that for a long time the public benefit, with an occupational supplement, was viewed as providing sufficient income.

The demand for private insurance did not take off until around 1990, with the beginning of the downsizing of the public commitment – beginning with the abolition of the widow’s benefit for younger birth cohorts. The relatively strong increase in the demand for private insurance in the early 1990s may also have reflected a feeling of pessimism among younger birth cohorts that the public commitment would not be honored in full in the future. The reform legislation of the public system, moving from DB to DC, confirmed this, at least in a sense. Although the move to DC was more or less neutral or advantageous for a 40-year plus career worker, it definitely reduced commitments to participants with short earnings careers. In addition, it made retirement at a fixed age, the current “normal” retirement age of 65, more costly in terms of income replaced for successively younger birth cohorts.

Overall, the succession of changes, beginning with the reform of the public system, signals a continued future increase in demand for private longevity insurance products, including life annuities. In fact, life annuities should be expected to be demanded especially by women born after 1945 in part due to the overall age difference between spouses and in part due to the fact that women live 4-5 years longer than their spouses. Within traditional insurance, the portfolio of products offered in the Swedish market has remained practically unchanged for over a half century. The major product innovation during this period was the introduction of unit-linked insurance, giving participants the opportunity to manage their own funds, not only during the accumulation phase, but even during the payout phase, with the latter resulting in a variable 56