Number of old age pension recipients

Supplementary pension schemes, which are both statutory and based on collective agreements, apply mainly to government and local-authority employees. Private-sector employees are covered by the schemes to varying degrees.

Denmark

The schemes cover 90 per cent of all full-time employees.

Finland

Supplementary pension schemes are negligible, as no upper limit is placed on the amount of the earnings-related pension.

Norway

The schemes cover almost 100 per cent of public sector employees. Following the introduction of OTP (mandatory occupational pensions in the private sector) in 2006 almost all private sector workers are also covered by supplementary pension schemes.

Sweden

Almost all employees are covered by supplementary pension schemes.

There are large differences between the Nordic countries in terms of the benefits payable to men and women. Men receive the highest amount in Finland, Norway and Sweden, due to a larger accumulation of ATP. Men in Denmark and the Faroe Islands receive the lowest amount, due to more of them receiving supplementary pensions that affect the amount of the basic pension.

A pension system may have different effects on women and men. One reason for this is that women and men typically have different degrees of attachment to the labour market. As described above, this has significance for work-based pensions.

In the Nordic countries, women are almost as economically active as men, but there are gender differences in the patterns of employment, as women often take the greatest responsibility for the family. This means that they more often work part-time or are not in gainful employment at all during their children’s early years. On average, therefore, they receive lower earnings over their lifetime than men.

In a pension system with a strong link between paid contributions and the level of benefit, there is no redistribution between persons with high and low income. The Finnish, Norwegian and Swedish pension schemes all consider earnings throughout working life. High lifetime earnings result in a higher pension, and the system consequently encourages gainful employment. However, unlike the Finnish system, the Norwegian and Swedish pension systems place a ceiling on the pension-qualifying level of earnings. Under these systems, parents of young children receive a kind of subsidy, in the form of the extra pension entitlements, which help to even out the differences in earnings between women and men.

In the Nordic countries’ public pension systems, the same level of earned pension entitlements provides an equally high pension for women and men. This also applies in systems that have a direct link between contributions and benefits. As such, women’s longer average life expectancy does not mean that they receive a lower annual pension. Where the annual pension is the same for men and for women, the lifetime pension of women is greater than that of men, and therefore constitutes redistribution in favour of women.

The level of the basic pension is high in Denmark, the Faroe Island and Iceland, but it is adjusted downwards in relation to the pensioner’s own income and the spouse’s income in Denmark and Faroe Islands. In Finland, Norway and Sweden, the basic pension/guaranteed pension is scaled down against the pensioner’s own earnings-based pension. The advantage of means-tested benefits is that they reach those who are in the greatest need of extra financial support. On the other hand, means-testing often has high marginal effects for low earners, which adversely impacts incentives for gainful employment and pension savings. Benefits tested against household income tend to have the greatest impact on the lowest earner in the households - in most cases, the woman.