SCGI

Andreas Gustafsson, Visiting Fellow at the SCGI, is Principal Editor of How Swedish pensions shaped the equity market: A historical study of institutional changes and strategic actions since 1913, a new report from the Stockholm School of Economicsand SCGI. It traces how Swedish pension capital came to occupy a structural position in the Swedish listed equity market, and asks how far that outcome can be reproduced elsewhere.

The report is written together with Simon Billinger, Åke Freij and Rasmus Nykvist at the Stockholm School of Economics. It draws on a database of primary and secondary archival sources covering the period 1913 to 2025, complemented by interviews and a workshop with senior pension industry executives. The work has been funded by the Nasdaq Nordic Foundation.

The study is a response to the current European debate. The EU Savings and Investments Union and the Franco-German FIVE report both hold Sweden up as a model for mobilising pension capital into equity markets. The report examines the historical record behind that framing.

Among its conclusions:

• A cornerstone, but a recent one. Pension capital has become a cornerstone of the Swedish equity market, but this role is recent, emergent and in important respects unintended, dating principally from the 1990s. The major public-pension expansions and system-defining reforms were driven primarily by retirement security and fiscal sustainability rather than by an objective to develop the equity market; the management of the capital and its market effects were at best secondary concerns in the founding debates.
• Design, not saver preferences, directed the capital. Defaults, automatic enrolment through collective agreements and, eventually, procured fund marketplaces did the allocational work that individual choice demonstrably could not. These are the most portable elements of the Swedish experience.
• Collective scale mattered. Swedish pension capital was pooled through large, professionally managed institutions and collectively agreed occupational schemes. This created the scale for professional management, long investment horizons and procurement-driven fee compression.
• The shift to defined contribution was decisive. It removed guarantee structures that elsewhere tilt portfolios towards bonds. The equity orientation followed from this shift alongside the liberalisation of investment mandates and wider capital-market reforms, not from any founding decision. Before 1990, some nine-tenths of AP Fund capital sat in housing credits and bonds.
• The transition held politically in part because it preserved a pay-as-you-go core, and because the AP buffer funds, deliberately overfunded from 1960, had reached 38 percent of GDP by 1995 and cushioned the double burden of paying current pensioners while a funded tier accumulated.
• Patience, not transplantation. Pension policy remains, in its fundamentals, a national competence under Article 153(4) TFEU. What can travel through EU law is market infrastructure; what cannot be enacted from above is the political settlement on which the Swedish outcome rests. The Swedish experience therefore offers design principles for national adaptation rather than a template that can be transferred at speed.

The report also enters a caveat against the model framing. The equity market outcome documented here does not translate mechanically into superior retirement incomes: Sweden’s net theoretical replacement rate, at around 67 percent, sits close to Germany’s 69 percent, which is consistent with the report’s central argument that the equity market role was an emergent by-product rather than a deliberate adequacy strategy.

The report will be presented at the seminar Det svenska pensionssystemets roll i en välfungerande kapitalmarknad (The role of the Swedish pension system in a well-functioning capital market), hosted by Nasdaq Stockholm on 3 September 2026, bringing together representatives from policy, academia and the financial market.

Because the account rests on a single national case, the report identifies important enabling conditions rather than necessary ones: a single case can show what happened in Sweden, not that it had to happen that way. The report examines Germany directly, including the removal of mandatory guarantees. The Netherlands, the United Kingdom, Ireland and Finland are a forward look and natural ground for comparative work: the Dutch transition from defined benefit to defined contribution; the UK’s Pension Schemes Act and Mansion House reforms; Ireland’s statutory auto-enrolment, live from January 2026; and Finland’s evaluation of elements of the Swedish model. Together with the German case and the distributional consequences of default-based systems, these developments provide natural cases for future research.

For further questions regarding the work on pension capital and the equity market conducted by SCGI, contact Andreas Gustafsson.