Flexibility in working hours and in the retirement age gives each worker the opportunity to choose between work and leisure. This freedom to choose is a benefit in itself. However, the terms - wages,  10  BIS Review 20/2002  working hours and pension schemes - should reflect the value added of labour. Pension benefits should therefore depend on how long each person chooses to remain in employment. Many countries have evaluated and some countries have worked out changes in their pension systems to cover a higher portion of pension expenditure through accumulated capital, i.e. a funded system. Sweden has recently implemented a pension reform that ensures that annual pension benefits increase in relation to the number of years the person has worked. At the same time, an increase in life expectancy for each age group will reduce the annual pension. This motivates the person to remain in employment and helps to ensure that the system is sustainable. Due to the duration of the transfers to pension reserves in Sweden, the replacement of the former pension system by the reformed one requires a transitional period over several years. In Norway, the surpluses on the current account and the Government Petroleum Fund simplify any replacement of today’s pension system by a funded pension system. Labour is our most important resource. The decline in average hours worked cannot continue if we are to have a sustainable pension system.
The current evaluation of our public pension system must focus on the incentives to work and the effects on the average retirement age. A fund-based system may be an appropriate approach and at the same time make pension savings transparent for each individual. This may in itself provide an incentive to increase working hours. Thank you for your attention. BIS Review 20/2002  11