SWEDEN - Insurers currently managing blue-collar workers' money could be under pressure to cut fees by as much as 70%, as workers sign a new pension provision deal and their pension premiums are put out for tender.
Fora, the pension administrator collecting the money for the blue-collar defined contribution scheme, confirmed to IPE it will be looking for managers for the premiums collected from next year.
In 2006, premiums amounted to SEK8bn (€870m) but in 2007 the same sum was already reached in April. From next year, the premiums will increase even further as blue-collar unions have managed to negotiate an increase in employer contribution from 3.5% to 4.5% - the same as in the white-collar ITP pension provision.
As IPE reported last November, blue-collar workers had gone back to the negotiation table over their defined contribution occupational pension scheme Avtalpension SAF-LO, which has been in place since the late 1990s, after white-collars signed a much more advantageous deal after ten years of negotiations.
Unions believe they have also achieved a victory over insurers by adopting the blue-print of the more advantageous white-collar pension provision blue-print. Until now, insurance companies managing the pension money have had virtually no competition and it was felt they could therefore charge relatively high fees.
"The ITP tender led to an average cut in fees by 70% annually," explained Mikael Nyman, Swedish market expert and editor of financial newsletter Pensioner & Förmåner.
He expects the same thing to happen for blue-collar pensions once Fora puts the new money up for tender which means "a 25-year-old entering the system will benefit by a 20% larger pension capital on his retirement day thanks to the lower fees," according to Nyman.
Furthermore, Åsa Gidlund, pensions expert at Fora, said while the SEK60bn which have already accumulated in the blue-collar Avtalpension SAF-LO, set up in the late 1990s, will remain with the insurance companies, workers will be able to take already accumulated benefits to a new provider too.
In February, Collectum - which is responsible for pooling money under the white-collar ITP scheme - appointed eight managers for managing pension premiums to be collected from next year.