Swedish roundup: AP7, Skandia Nordic, Swedbank, Momentum
SWEDEN - The Swedish government sent out a proposal of consultation on new individual investment savings accounts in December, and the responses from various industry organisations and labour market partners have been largely negative.
The most common objection has been that the system is too complicated. Many also argue that the initiative will not increase long-term savings, which is what the government hopes for.
The reason is that only these new types of accounts will have preferential tax treatment, whereas older savings will remain unaffected.
Some would want to give savers an incentive to move their existing savings into the new types of accounts, but that is not yet part of the proposal.
Many of those negative to the accounts believe the tax burden will increase and that Sweden is swimming against the tide in Europe, where many countries are reducing their capital gains taxes.
The Swedish Federation of Enterprise and the country's largest blue-collar labour union, LO, which rarely agree on anything, do not like the proposal either, but for different reasons.
The Federation argues that the accounts are a Trojan horse that will lead to the reintroduction of the abolished wealth-tax, whereas LO believes the tax involved will be "incomprehensible".
If approved, the accounts will be introduced in January 2012.
The only positive response so far is from the Swedish Tax Agency, Skatteverket. According to the Agency, the new accounts will make taxes simpler for people who own stocks and shares.
The Agency would, however, want to see some changes to further simplify the tax implications. It would like to make sure that savers with as much as SEK50,000 (€5,700) in securities would be allowed to move their assets to the new type of investment account without having to declare this.
It also suggested that the new accounts should be made more in-line with the rules for other types of insurance and pension savings.
Peter Norman, minister for financial markets, said he was undeterred by the critics, but he conceded that the proposal needed to be fine-tuned, which is why it has been out on consultation.
He said he did not see the criticism as a failure and says he does not see it as personal prestige but welcomes all that want to improve the proposal.
In other news, AP7, the default option within the Swedish premium pension system, showed mixed returns for 2010.
The period accounted for starts in May 2010, when the fund was restructured and divided into an equity fund and a fixed income fund.
The equity fund returned 14.2%, whereas the fixed income fund was down 0.4%. The equity fund has SEK104bn in assets and the fixed income fund SEK6bn. The assets of the latter are entirely invested in Swedish government and corporate bonds.
The people within the PPM system who chose not to select their own fund providers and who are under the age of 55 have 100% invested in equities in AP7's generational option, which returned 15.6%, which compares very well with the average return of 10.3% for the PPM funds in total.
Skandia Nordic, owned by Old Mutual, saw its assets under management increase to SEK145.5bn from SEK127.2bn during 2010 as a result of positive equity markets. Its operational results increased by 66% to SEK1.3bn compared to SEK737m in 2009.
The key driver behind the improvement was higher client funds, which increased fund-based fees and rebates in the long-term business. In particular, the unit-linked business performed strongly in the second half.
A gain realised from divestment of a private equity holding in the first half contributed profit of SEK126m.
Mutual fund sales of SEK6.5bn were up 37% on 2009. This was driven by improved retail investment activity spurred by rising global equity market.
New client inflows for the year totalled SEK7.4bn, a decrease of 36% compared with 2009 because of lower sales.
The Swedish unit-linked portfolio returned 10.9% for the year.
Skandia's clients have generally increased their risk exposure, with the majority of all net investments being allocated to Swedish, Asian and emerging market equity funds. Fund performance over the 12-month period shows that 63% of Skandia's funds performed above average compared with their peers.
At the same time, Skandia is reorganising and will focus on web solutions, resulting in as many as 300 redundancies in the Nordic countries in 2011-12. In particular, Skandiabanken, the company's banking arm, will become more of a self-service entity.
Skandia Nordic has some 2,700 employees.
Lastly, Swedbank, the Swedish banking group and one of the largest fund providers in the country, is closing Momentum, one of its funds in PPM, the country's defined contribution pension system, for new investors because of the size.
Momentum is a fund that invests in other funds and focuses on markets that are doing best during the acting period, which is every second month.
Because of the size of the fund, there is a risk it will negatively affect the funds it buys and hamper the ability to achieve expected returns.
The Momentum fund has SEK1bn in assets.