The Swedish arm of pharmaceutical multinational AstraZeneca is to transfer around SEK2.2bn from its balance sheet into a pension foundation, which could be outsourced to external managers as early as the beginning of next year.
The firm is the latest in a line of Swedish companies to scrap their book reserve commitments in favour of funded arrangements.
Michael Runnako, director for European pensions and international risk at AstraZeneca in Stockholm, says the firm has been looking at the issue for more than six months and discussing how the foundation should be organised. “We have taken an executive board decision to establish a pension foundation instead of having the book reserve method.
“What we are now discussing is how to organise, in particular, the asset management of the foundation in order to meet our pension liabilities – whether we should do it internally or if we should outsource it.We hope to finalise this within the next couple of months,” he says.
The fund will be a defined benefit (DB) pension plan under Swedish collective labour law and receives employer contributions only.
Runnako says the main advantage of switching to a foundation will be the long-term focus on asset allocation to cover the liabilities and the management of assets to meet these liabilities.
In a related initiative, Runnako says a group of multinational firms in Sweden is clubbing together under a collective defined contribution (DC) pension plan in a bid to bundle administration and asset management and to eliminate brokerage commissions.
The DC initiative, started in 1999 through co-operation between AstraZeneca and Swedish telecommunications group Ericsson, is now attracting interest from a further six or seven multinationals, according to observers, including Scandinavian airline SAS and clothing empire Hennes & Mauritz.
Runnako, explains that under the traditional defined benefit (DB) collective industry agreement, companies have the opportunity to opt out for higher salary employees and establish a DC plan.
“ What we have done is to establish a common industry-wide plan with some bundled administration, asset management and the approach towards these unbundled approaches from insurance companies is to make them effective and minimise costs.
The primarily unit-linked joint arrangement with Eriksson began in December 1999 and has so far accumulated around SEK200m (e21m) in contributions.
Runnako adds:“I’d like to see some changes to the insurance markets in Europe. We are changing the market for insurance companies in Sweden through these arrangements.” He notes that the advantages to firms include greater cost effectiveness and transparency and adds that the firms have managed to fully eliminate brokerage fees.
Runnako himself also takes up a new position with AstraZeneca from January 1 next year, graduating to the position of worldwide responsibility for the group’s pension arrangements.