Swedish pensions firm Movestic said the process of reforming the country’s first-pillar premium pension currently underway is actually an attempt to kill off the defined contribution (DC) system, in which Swedes can choose to invest some of their state pension contributions in privately-run funds.
Stefan Klohammar, investment director of pensions provider Movestic, which is owned by the London-listed firm Chesnara, wrote in a blog: “Proposals for changes to the premium pension are out for consultation – an attempt to kill the system step by step.”
He said scandals around companies offering funds on the funds marketplace (fondtorget) had eventually led to last Friday’s proposal from the Swedish FSA (Finansinspektionen) that the platform should be fundamentally reworked and include only 10 to 15 funds in order to offer better protection for pension savers.
“The Allra affair combined with Falcon Funds, among other things, is the background to the eagerness to redo the premium pension system. An investigation that became a proposal that became an investigation that became a new proposal,” he said.
“Now, in a consultation response, Finansinspektionen thinks that the premium pension should consist of 10 funds,” said Klohammar.
It was possible to have many opinions about the premium pension, the general pension and the activities of the Swedish Pensions Agency (Pensionsmyndigheten), he said.
“But the right to choose freely and the right to your property must have a value,” he added.
Klohammar said the fact that some government officials were investigating and then deciding which funds would be available was out of date at a time when technology was advancing and hastening the flow of information.
But he said politicians were not reaching out to defend an improved open system because there were no political points to win.
“The unspoken final goal is to close the premium pension box completely,” he said.
“The unspoken final goal is to close the premium pension box completely”
Stefan Klohammar, investment director of pensions provider Movestic
Meanwhile, the funds lobby group Swedish Investment Fund Association (Fondbolagens Föreningen) said in its response to the consultation that the proposed procurement regulations for the funds marketplace were completely wrong, and stopped the premium pension achieving its goals.
The association – whose members include many firms currently offering funds on the platform - argued in favour of using a different type of procurement for funds to be offered on the funds marketplace.
It advocated using the Swedish “LOV” procedure, under which all bidders meet certain requirements are admitted, rather than a public “LOU” procurement procedure that limits the number taken on.
“By applying a free choice procurement, all goals can be achieved without the negative consequences that the investigations proposals lead to,” it said.
Overall, the association said it shared the ambition of making sure the funds marketplace functioned well and contributed to higher pensions.
“However, the proposals presented in the study are not suitable to achieve that goal,” it said.
It noted that the proposals for a complex choice architecture introduced a number of barriers for savers wanting to make their own choices, and in practice severely restricted freedom of choice, distorted competition and were likely to conflict with European Union state aid rules.
Another criticism levelled by the Swedish Investment Fund Association was that the procurement procedure as envisaged would create bigger flows than previously available on the market, which it said could not be managed without negative effects on transaction costs and returns.
“It contradicts the purpose of achieving higher pensions,” the lobby group said.