percent. The 3.5 % contribution rate is the initial rate for the large LO collective agreement. Note that by the end of 2007 all major collective agreements either had a contribution rate of 4.5 % or had a transition schedule to move to 4.5 % in the future.

Table 3 presents calculations of income replacement rates for a person born 1975, who enters the labor force at age 22 and works all years to retirement at one of the ages specified in the table, with the present unisex life expectancy projection for this birth cohort from the various specified retirement ages. Use of unisex life expectancy is a requirement of a European court ruling for both public and occupational schemes. Note that inheritance gains (account balances of the deceased under the minimum retirement age that are distributed to surviving participants in the insurance pool) are not included in these calculations, which means that benefits are slightly underestimated. Calculations have been performed assuming that the occupational scheme pays a contribution rate of 3.5 %, which is directly applicable to an LO employee.

The results show that the long career worker would have a considerable replacement rate with a 5 % rate of return. The results suggest that coverage is sufficient, even if the worker were to work fewer years than the number (from age 22) assumed in the calculations.

**Table 3  Individual Benefits as a Percent of Final Earnings**

||NDC<br>Public Second Pil<br>Occupational (3.5|lar (2.5%) + G<br>%)|Tot<br>plu<br>roup|al. Public PAY<br>s Group Occu|G and Second<br>pational|Pillar|
|---|---|---|---|---|---|---|
||Return of :<br><br>Contribution||Re<br>|turn of**:**<br>|||
|Age|2%<br>rate of 16 %|5%|8%|2%|5%|8%|
|61|0.32<br>0.12|0.23|0.47|0.44|0.55|0.79|
|62|0.33<br>0.13|0.25|0.52|0.46|0.58|0.85|
|63|0.35<br>0.14|0.27|0.57|0.49|0.62|0.92|
|64|0.37<br>0.15|0.29|0.63|0.52|0.66|1.00|
|65|0.39<br>0.15|0.31|0.69|0.54|0.70|1.11|
|66|0.42<br>0.16|0.33|0.76|0.58|0.75|1.18|
|67|0.44<br>0.17|0.36|0.83|0.61|0.80|1.27|
|68|0.47<br>0.18|0.39|0.92|0.65|0.86|1.39|
|69|0.50<br>0.19|0.42|1.01|0.69|0.92|1.51|
|70|0.53<br>0.20|0.45|1.12|0.73|0.98|1.65|

Calc ~~ulated for a person entering the labor force at the age of 22 and who works every year until retiring at~~ the age indicated in the table. Earnings grow at a rate of 2 % per year. Indexation in the NDC scheme is also 2 % per year. Unisex life expectancy for a person born 1975 is used to calculate annuity values. The NDC annuity is based on life expectancy and an assumed real rate of annuity growth of 1.6% during the annuity period. The calculations do _not_ include a possible increment deriving from the capital of non-survivors. Source. Palmer 2002.

# **_2.5 Summary_**

In sum, seen in the present context, the reform of the public system had three effects on the development of pension schemes in Sweden. The first was that it set a clear ceiling on the scope of the mandatory public system, establishing the room left for private occupational and individual initiative. Second, the major occupational schemes were converted into DC schemes for the supplements to the public scheme under the ceiling for the public commitment. By 2007, all major occupational pension schemes had been converted from 16