Sweden is moving ahead with legislative proposals to relax the investment restrictions placed on the biggest national pension fund AP7, allowing it to add illiquid assets.
The government submitted proposals for changes to the SEK967bn (€92bn) fund’s regulations on Thursday to the Council on Legislation (Lagrådet) – a key step in the process of making important new laws in Sweden.
“The proposals mean, among other things, that the fund will have new investment rules and that a new sustainability target will be introduced,” the government said.
AP7 operates the default option in the premium pension system, which is a system of individual investment accounts and forms part of the state pension.
The entire premium pension system is in the process of reform, and liberalising AP7’s mandate – which currently allows it to invest only in equity or bonds – is part of this.
Finance minister Max Elger said: “The Seventh AP Fund will provide high-quality pension savings with secure pensions for those who do not actively choose funds for their premium pension.
“We are now giving the Seventh AP Fund the tools to meet the new goal of the premium pension system,” he said.
In order to create better conditions for higher returns, the government said, AP7’s investment rules were being adjusted so as to expand the options to allow it to invest part of the fund’s capital in illiquid assets as well, describing them as assets that were not traded daily on the financial markets.
The proposal mentions possible limits on the proportion of the fund that may be invested in certain types of assets, but any such ceilings have yet to be decided on.
It also stipulates that AP7 must have a sustainability goal which means it has to be managed in an exemplary manner in that respect, according to the announcement from the government.
“In managing this, special emphasis shall be placed on how sustainable development can be promoted,” the government said, adding that such a sustainability goal already applied to AP1-4 and would soon be introduced for AP6 as well.
The amendments to the law contained in the proposal are to come into force on 1 January 2023, according to the current plan.
The proposals in the referral are based on the Pension Group’s agreement of 14 December 2017, and the proposals in the memorandum on the default option in the premium pension (Fi2020 / 00584 / FPM), it said.
In a 2020 consultation on the plans to allow changes to AP7’s asset allocation, some national pension buffer funds voiced doubts about aspects of the ideas put forward at that time.