Finland is considering whether the Swedish pension model could be partly adapted to its own retirement system, giving workers greater control over how a portion of their pension contributions is invested. The Finnish government has appointed Aalto University professor Samuli Knüpfer to examine the proposal, with a final report expected in January 2027.
The study focuses on Sweden’s premium pension, a mandatory funded component that links part of a worker’s future pension directly to investment performance. Supporters argue that the system could make pension savings more transparent and strengthen confidence among younger workers. Critics warn that it could also expose individuals to greater financial risk.
How the Swedish pension model works
Sweden’s retirement system rests on three main pillars: the state pension, an occupational pension normally provided through employment agreements, and any voluntary private savings.
The state pension is largely financed through contributions equal to 18.5 percent of pensionable income. Most of this, 16 percentage points, goes into the income pension, which is financed mainly through current contributions from workers and employers.
The remaining 2.5 percentage points are directed to the premium pension, known in Swedish as premiepension. This money is placed in an individual account and invested in financial markets.
Workers may choose up to five funds from the options available within the public system. Those who do not make an active choice are automatically enrolled in AP7 Såfa, a state-managed default fund.
The Swedish Pensions Agency (Pensionsmyndigheten) administers the system and converts the accumulated capital into a lifelong pension when the worker retires. The pensioner can choose a more stable payment or leave the capital invested, allowing the monthly amount to continue changing according to market performance.
The premium pension remains only one part of the total retirement income. Sweden also provides a guarantee pension for people with low or no lifetime earnings, while most employees receive an occupational pension from their employer.
High returns, but less predictable pensions
The funded component has delivered strong returns over the long term. From the introduction of contributions in 1995 until the end of 2025, the premium pension recorded an average annual return of 8.5 percent, compared with 3.4 percent for the index used to adjust the income pension.
The default AP7 Såfa fund has generally performed better than the average privately selected portfolio. It also automatically reduces investment risk as the saver grows older. From the age of 56, an increasing share of the portfolio is gradually shifted from equities to bonds.
However, the model has not produced equally strong results in terms of stability. The value of the premium pension may rise or fall with financial markets, including after retirement.
This creates significant differences between workers depending on which funds they choose. People who concentrate their savings in a single market or sector may experience particularly large losses.
The risks became visible after Russia’s full-scale invasion of Ukraine in 2022. Funds focused on Russian assets lost almost all their value, and some Swedish pensioners who had invested their entire premium pension in those funds stopped receiving payments from that component.
Many people also do not remember which funds they selected. Others leave their pension invested in equities after retirement, even when less volatile alternatives are available.
For people who began receiving the premium pension at the start of 2026, the average payment was approximately €300 per month. Across all current recipients, including older workers who contributed to the system for fewer years, the average was around €130 per month. Sweden’s average total pension is slightly above €2,100 per month before tax.
Why Finland is examining the Swedish system
Finland’s Minister of Social Security (sosiaaliturvaministeri) Sanni Grahn-Laasonen appointed Knüpfer in June to assess whether a similar component could be introduced into the Finnish pension system.
Knüpfer argues that Finnish residents have become more familiar with investing and that the pension system itself already depends substantially on returns generated by pension funds.
A personal investment account could make the relationship between contributions and future benefits easier to understand. Workers would be able to see how their money is invested and how returns affect their pension.
This could be particularly relevant for younger adults, whose confidence in the pension system has weakened. Under the current model, individual workers have little direct contact with the investment of pension assets, even though they can monitor the pension rights accumulated during their careers.
The Swedish component would not replace Finland’s current pension system. Knüpfer has said that the existing structure would continue to provide the main retirement income and ensure a reasonable pension for everyone.
Finland would need its own safeguards
Adopting the model would raise difficult questions about both risk and financing.
Finland relies more heavily than Sweden on its statutory earnings-related pension. Swedish workers commonly receive pensions from several sources, particularly occupational schemes negotiated through collective agreements. A poor investment result in one component may therefore have a more limited effect on their overall income.
In Finland, differences caused by individual investment decisions could have a greater effect on the final pension. Policymakers would need to decide how much inequality between pensioners is acceptable within a mandatory social insurance system.
The government would also need to prevent workers approaching retirement from being excessively exposed to market falls. Possible safeguards include a limited selection of regulated funds, automatic risk reduction with age and a strong default option for people who do not wish to manage their investments.
Financing presents another problem. Finland’s earnings-related pension contribution currently equals 24.4 percent of wages, and much of this revenue is used to pay current pensions. Redirecting more money into personal investment accounts could leave less funding available for existing pensioners.
Knüpfer will therefore study whether the new component could be financed from the share that Finnish pension institutions already invest, without increasing total contributions.
Nordic pensions follow different combinations
All Nordic countries combine public retirement protection with earnings-related or occupational pensions, but they distribute responsibility differently.
Denmark and Iceland rely heavily on funded occupational pension schemes. Contributions are invested throughout a worker’s career, usually through funds connected to employment or collective agreements. Their pension systems therefore already give financial markets a central role, although investments are generally managed collectively rather than selected directly by each worker.
Norway combines a public pension linked to lifetime earnings with mandatory occupational pensions. Employees normally do not choose the investments used for the main state pension, while employers must provide a separate funded scheme.
Finland’s system is also partly funded, but pension institutions invest the assets collectively. Individual workers do not choose the funds, and their statutory pension is based mainly on earnings and years of work rather than the performance of a personal portfolio.
Sweden is unusual because it places a small but mandatory part of the state pension into individually allocated funds. The Finnish study will examine whether this additional element can improve transparency without weakening the collective protection at the centre of the current system.
The debate is therefore not simply about increasing investment returns. It concerns how Nordic welfare states divide financial risk between public institutions, employers and individual workers. Finland’s final decision will depend on whether the Swedish experience can be adapted while limiting volatility, inequality and pressure on pension contributions.
