Sweden in 1913 was the first nation in the world to implement what has been described as a “universal pension system”. The scheme was not fully universal, however. It guaranteed residents aged 67 and older only a minimum pension, a flat benefit reduced by the amount of other pension income. The conservative government of the day considered, and rejected, the idea of a universal pension with the same flat benefit for everyone. To this day, Sweden continues to provide its elderly a minimum pension rather than a universal pension.
The general pension insurance, thus established [in 1913], basically encompassed the entire population. Even those who were unable to work because of disability, or had already reached the age of 67, received a pension. The pension consisted of two parts:
1 A pension financed by the individual’s own contributions, which were based on his/her taxable income; the higher the income, the higher the contributions.
2 A tax-financed, income-based supplementary pension intended for those either not covered or not covered adequately by a pension of the first type. This pension aimed at removing elderly or disabled persons from poor relief.
In discussions and proposals leading up to the decision taken in 1913, … alternative models were considered. Two of them had little support and can be regarded as unrealistic. One involved a type of state-subsidized voluntary insurance. Experience had shown that few people selected voluntary insurance of this sort, and that those who did were scarcely those most in need of it. So pension insurance had to be compulsory. The other impractical model was a universal tax-financed pension with a flat rate. There was no financial basis sufficient in size for a pension of this sort and no country in the world had such a pension system.
Per Gunnar Edebalk & Mats Olsson, “Poor Relief, Taxes and the First Universal Pension Reform: the origin of the Swedish welfare state reconsidered“, Scandinavian Journal of History 35:4 (December 2010), pp. 398-399 (emphasis added).
The authors are professors at Lund University, Centre for Economic Demography. An earlier, ungated version of their paper is available here. (Scroll down to Mats Olsson.)
The argument that a universal pension was unaffordable seems strange, to me, for almost no-one in Sweden received an old-age pension before 1913. The cost of a universal pension would have been almost the same as the cost of a universal minimum pension of the same size.
So far as I have been able to determine, New Zealand was the first nation in the world to provide its elderly population with a universal pension. Legislation was passed in 1938, and benefits commenced in 1940. Other countries followed, including Canada, Australia, Mauritius and Norway. Of this list, only New Zealand and Mauritius continue to have universal pensions.
