A sick insurance system? - The effects of sick leave on the financial stability of the Swedish Pension System

Abstract: After the reform in the 1990’s, the Swedish pension system is one of the most financially stable in Europe, but the high level of sick leave is a problem left to solve. The purpose of this thesis is to examine the effect of sick leave on the financial stability of the Swedish pension system, today and in the future. We aim to enlighten the link between the sickness insurance and the pension system and show that these two are communicating vessels, why the number of people on sick leave has an impact on the governmental expenditure on pensions. This is done in a three-piece analysis including a numerical model, concluding that the high level of sick leave is a risk factor, especially since the margins in the pension system currently are small. The analysis also enlightens the state’s pension entitlements for recipients of sickness and activity compensation, and how these entitlements stretches far into the future. There is a need to get more people receiving sickness and activity compensation back to the labour market to lower the costs of pensions, not least the increasing number of young recipients.