Application of the logical sustainability theory to the Swedish pension system. Logical Sustainability Indicator and Balance Ratio, two indicators in comparison
Keywords:logical sustainability theory, sustainability indicators, swedish pension system, balance ratio, logical sustainability indicator
Our study focuses on the application of the Logical Sustainability Theory (LST) to the Swedish Pension System, which is a Notional Defined Contribution pension scheme with an automatic balance mechanism that should be able to restore its long-run balance. In our opinion, this mechanism does not ensure the sustainability in a logical-mathematical key. Vice-versa, the LST does it in a logical-mathematical key by means of the Logical Sustainability Indicator (LSI). Indeed, the LST, introduced in Angrisani (2006, 2008) up to Angrisani and Di Palo (2019), is a Theory completely developed for defined contribution pension systems with a funded component. Assumed the Swedish Pension System “adjusted” to the LST hypotheses, the LST basic Beta Indicator, which provides the level of the “unfunded pension liability” in relation to wages, has been calculated. Applying the rule on the rate of return on the pension liability that stabilizes this Indicator, a Sufficient Condition for the sustainability of the pension system with a constant contribution rate is introduced and applied to the Swedish Pension System. Data are provided by the Swedish Pension System Annual Report for year 2017. The comparison between the LSI and the Swedish Balance Ratio is also carried out.
Copyright (c) 2021 Massimo Angrisani, Cinzia Di Palo, Pierluigi Fava
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.