employee and employer confederations who see possible advantages in being able to offer a pension at a younger age than the minimum retirement age of 61 under the mandatory system. By retaining the low minimum age of 55 for claiming retirement products, policy makers enable early exit from the labor market financed through private saving, while maintaining a much higher normal pension age for the mandated public schemes, thereby not subsidizing early retirement of healthy workers. There is an obvious distributional aspect to this sort of rule, favoring the economically better off, since the lifetime poor have to wait until age 65 in Sweden to claim a guarantee benefit.<sup>21</sup> Finally, in addition to individual voluntary insurance and the quasi-obligatory collective occupational schemes, it is possible for the employer and employee to agree on other than the standard retirement arrangements. Employer payments for insurance in this connection are tax deductible, while benefits when claimed are taxed as normal income. This option provides an alternative for employers to create tailored individual agreements for selected employees as an extra incentive in employment contracts as well as to negotiate compensation for severance not available in the standard collective agreement possibilities. Individual agreements falling under the second category can compensate for a combination of either lost earnings or lost pension rights in the standard schemes resulting from earlier retirement. A study of Swedish data by Eklöf and Halberg (2006) estimates that the probability to exit the labor force early would fall by 14-25 percent, depending on the year examined, if the possibility for employers to give a ”golden handshake” of this kind were to be eliminated.

# _4.4.2 Insurance Products for Retirement_

Traditional insurance in Sweden offers lump sum payments (called _kapitalförsäkring_ ), phased withdrawals (temporary annuities using the Swedish terminology) and life annuities. Only phased withdrawals and annuities are eligible for preferential tax treatment. These, together with unit-linked (fund) insurance constitute the retirement products available in the Swedish insurance market. Table 11 summarizes the availability of the three major categories of retirement products within individual, occupational and public (PPM) schemes.

**Table 11.  Overview of products by category of provision**

||PPM|Occupational|Individual|
|---|---|---|---|
|Lump-sums|No|No|Yes|
|Phased withdrawals|No|Yes|Yes|
|Annuities|Yes|Yes|Yes|

Individual voluntary insurance can be DB or DC. In traditional DB, the insured makes no investment decisions and the benefit is defined from the outset of the contract. In individual DC, the individual determines his/her own portfolio from a list of options during the accumulation phase and chooses between a traditional and a unit-linked product during the decumulation phase. Traditional insurance offers an annuity with a guarantee plus a bonus. The benefit can either be a phased withdrawal or a life annuity. By choosing a unit-linked annuity (phased withdrawal or life annuity) the insured determine the investment portfolio,

> 21 On the other hand, there is a positive selection of persons with low education, low income and a looser labor market attachment to disability take-up prior to age 65.

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