The 1994/1998 pension reform in Sweden introduced a so-called notional defined pension system. As part of the reform, new accounting rules were introduced. The accounting rules were largely an unintentional spin-off from the goal to secure automatic financial stability.

The aim of this paper is to present the accounting method used, not by theoretical description, but rather by presenting the financial development of the system by means of the income statement and balance sheet themselves for the seven years from 2002-2008. The paper describes rather than analyses. A reason why the presentation might have some interest for outside readers who do not participate in the Swedish plan, is that the income statement quantifies aspects of the economic and demographic developments that have an impact on all (pay-as-you-go) pension systems but which normally are not described explicitly as separated and quantified items in actuarial evaluations. It is almost certain that the changes quantified in the financial statements of the Swedish plan exist in most countries public pay-as-you-go pension plans, but are not as clearly visible. Another reason for why this description might have some general interest is that Sweden is relatively unique in that it has sought to fix its pension system contribution rate by distributing all risks of adverse economic and demographic developments among all insured, rather than among present or future contributors or taxpayers. In such a system the impact of the 2008 financial and the 2009 economic crises are directly visible and affect benefits. The first experience that Sweden’s new pension system has had with a sharp economic recession can thus, hopefully, add something to the stock of international knowledge on how such a system works in adverse circumstances. However, even in Sweden the risk distribution is not clear-cut. The guaranteed pension – a government financed minimum benefit – transfers the burden of an adverse economic development away from retirees with the lowest pensions back to the government and taxpayers.