Sweden takes step to IORP implementation

SWEDEN - The government’s insurance corporation overhaul committee has today presented its proposal for the implementation of the EU pension fund directive to deputy minister of Finance Gunnar Lund, Alex Inkapool writes.

The committee – chaired by senior judge Åke Thimfors - has now given its interpretation on the way the directive on the Institutions for Occupational Retirement Provision is to be implemented in Swedish law.

The move means Sweden is one of the few EU member states that can be seen to be making progress in implementing the directive.

The directive will in Sweden apply to pension funds that provide pension contracts, a form of less regulated insurance companies and traditional pension foundations.

The pension foundations subsidiary function of being collateral for the corporations pension liability but without any primary responsibility for towards the beneficiaries voids certain rules of the directive.

The IORP directive allows member states to allow the directive to encompass not only IORP but also retirement provisions supplied by insurance companies.

The legislative committee proposes that Sweden should allow insurance companies to use the IORP directive.

However it means that all retirement provision assets within an insurance company have to be ring-fenced.

The committee also proposes that the actuarial calculations for retirement provisions and matching assets have to be completely separated from the insurance companies other asserts and liabilities.

The most radical proposal is regarding the investment rules of an IORP. The basis for these completely new rules are the prudent person rule which directs it primary interest is the investment process of the IORP it includes i.e requirements on assets management that satisfies the concerns and interests of the beneficiaries.

A concern has been whether or not Sweden would opt for the so-called ‘Prudent Person Plus’ investment principles. According to sources familiar with the situation, the debate in the committee was intense but it seems that they opted for few restrictions.

According to committee secretary Magnus Lundin, the only restrictions are that a maximum of 30% may be invested in unlisted securities and that no more than 30% may be invested in assets that do not match the currency of the liabilities.

However Lundin stressed that it does not mean physical investing but that currency hedging will be allowed.

The very detailed regulations of pension funds and insurance company asset management will no longer apply i.e. limits as well as allowable investments. However investment in the sponsoring company as well as in a group company is now severely restricted.

Under the proposals, there will be dual supervision, with the Swedish FSA overseeing financial issues while the Count
Administrative Boards Occupational Retirement Provisions department will supervise the civil law issues as well as certain financial issues such as investment regulations.

According to Lundin and his colleague Ann Loise Björnsson, all issues have not yet been resolved. Certain difficult issues have been put for further investigation.

The committee’s proposals appear to contradict recent moves by the Swedish Supreme Administrative court which has ruled in favour of more restrictive tax treatment of foreign pension fund contributions.

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