The life and pensions division of Sweden’s Folksam Group is working to get parts of its business to conform to the country’s IORP II regulatory regime for pension funds, the firm said, but its CEO said tax rules are still proving an obstacle.
In the company’s financial report for the first quarter of this year, Folksam chief executive officer Ylva Wessén said: “As of March 1, KPA Livförsäkring has been transformed into an occupational pension company and so also changed its name to KPA Tjänstepension AB.”
KPA Livförsäkring (KPA Life Insurance) is part of the Swedish municipal pension provider KPA Pension, which is jointly owned by the Folksam Group and the Swedish Association of Local Authorities and Regions.
“Work is underway to prepare further occupational pension activities within the Folksam Liv (Folksam Life) group for the new occupational pension regulations,” Wessén said.
“A complication in the matter is the aggravating tax effects that the current rules entail for mutual companies, something that Folksam brought to the attention of both the Ministry of Finance and other ministers,” Wessén said.
Folksam said in its report that there was a need for “tax-neutral rules” when transforming into occupational pension companies.
“Today, there is no competitive neutrality, as only customer-owned insurance companies suffer unjustified tax effects when converting to occupational pension companies, according to the occupational pension regulation, while limited companies can avoid them,” it said.
The firm said it had proposed adjusting the tax legislation so that even customer-owned pension firms could make sub-portfolio transfers with tax continuity when converting to new IORP II entities.
Several Swedish pension providers have now applied to convert their regulatory status from life insurance companies, which are subject to the Swedish version of the EU’s Solvency II regulatory framework, to the new corporate status of occupational pension companies or associations, (tjänstepensionsföretag) which come under the newer IORP II-based rules.
In late April, the largest pension provider, Alecta, finally announced it would apply for conversion, having had doubts about details of the upcoming rules before when the law was still being hammered out.
In the Swedish national implementation of IORP II, the risk-based capital requirement is calibrated at a value-at-risk of 97% – lower than the 99.5% set out by the EU.
AMF has also decided to apply to make the change, as have Kåpan pensioner, SPK – Sparinstitutens Pensionskassa and others.
In its first quarter results released today, Folksam reported its life and pensions division, Folksam Liv, made a total return of 4.2% in the period, with KPA Pension producing a 4.6% return.
Group assets under management rose to SEK512.7bn (€50.7bn) at the end of March from SEK483.2bn at the end of 2020.