State social insurance and private pensions funds are widely known in many countries. Why do the state accumulative pensions funds still lack popularity and can they serve as an alternative?
They are not usually well seen from the academia, because it is considered that the state is a bad investor in financial markets, both because it would be distorting the private sector and because it is believed that the returns achieved would not be high (to some extent, previous experiences of public funds in some countries back this statement). Nevertheless, there are important public pension funds in Norway, Sweden, the United States or Spain.
Dear Jose-Ignacio,
Thank You for Your reply. I have information about public pension funds in Norway and Singapore. Could You somehow in short enrich our understanding about such funds in Your mentioned Sweden, the USA and Spain? May be, You know the aggregated source for such funds?
In the case of the US and Spain they mainly come from surplus of payroll taxes over pension spending, being the American fund much larger than the Spanish one. In the case of Sweden, apart from eventual surpluses, the origin has also to do with its history and politics. In 70s-80s, under the Olof Palme's governments, in close collaboration with the main trade union, they created a relevant fund that worked as follows: Employers has to pay some tax/contribution that was used by the people governing the fund to purchase shares of private sector firms so that workers could share firms' profits. The fund came to an end later, I believe that in early 90s, when the meachanism was stopped and the accumulated fund was converted into a reserve pension fund to be used to finance future pension benefist when Swedish population become older. I hope it helps.
Dear Jose,
I have heard about Your mentioned Swedish funds as Meidner wage-earners funds, when they were stopped in 1983. But I did not know that they later had an extension - as You write - were converted into a reserve pension fund. So, they did not disappear, as I understand, is it right? In any case Meidner funds were the example of "Fund socialism" or "Functional socialism" - the definition coined by G.Adler-Karlsson. But I do not believe that Swedish socialdemocrats after this sundays election win will return to Meidner funds. Because neo-liberalism and globalization has moved too far. In Lithuania it is totally unpopular to talk about state accumulative funds. Nor the government, nor the banks or other private organizations are interested in supporting them. Sad. Because there really are many people who want such funds. But they are not represented. This is one of the signs for formal democracy instead of real democracy in Lithuania.
Yes, they were basically converted in pension funds, which is the reason why the capital accumulated is comparatively higher than in other countries. I wrote my dissertation on pensions and I was more or less quite aware of the reforms in Eastern Europe. The just elected Socialdemocrat governement in Sweden will not come back to the funds (in fact, they were ruling all the time after a brief parenthesis in 90s until 2006). Even I think they are going to form a cabinet with center and center-right parties this time (instead with the Green and the Left Party, as until 2006 when they did not have absolute majority).
It is worth saying that some authors like Paul Samuelson and others claimed some years ago about the convenience of state pension funds.
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