Swedes who choose to invest their premium pension savings in private-sector funds, rather than plumping for the state-provided default option, have suffered lower returns on average, the Swedish Pensions Agency (Pensionsmyndigheten) has concluded.
Gustav Sundén, analyst at the Swedish Pensions Agency, said: “Only one in four people who have made their own fund choices have had a higher value development than the average saver in the default option AP7 Såfa.”
Publishing the results of an analysis today, the agency said that both during 2024 and since the premium pension was first introduced, pension savers who made their own fund choices from offerings on the funds marketplace (fondtorget) had, on average, fared worse in financial value terms than had they picked Såfa.
Sundén said it should be borne in mind that there was a very wide spread in value development among fund savers in the premium pension, with both higher and lower returns than the average.
However, in the study into the value development of the two elements of the Swedish state pension – the pay-as-you-go income pension and the defined contribution (DC) premium pension – the agency also said the Swedish parliament’s (Riksdag) target for the premium pension return to be clearly higher than income development had been met.
It also said the parliamentary objective for premium pension disbursements to be increasingly stable and predictable was being met for pensioners with the Såfa product, according to its assessment, in that risk decreased with age with the default product.
“However, the target is not being met for pensioners who have chosen their own funds on the premium pension funds market, nor for those who’ve chosen traditional insurance, because they lack a clear connection between age and risk,” said Susanne Schaftenaar, analyst at the agency.
The payout phase of the premium pension is coming under scrutiny in Sweden, with the all-party Pensions Group having recently agreed to an official investigation into how it works.
As well as parliament’s target for returns and pension payments, the agency said there was also a legal principle regarding freedom of choice in the premium pension system – meaning that savers ought to be able to influence the level of risk and investment orientation of their savings.
The agency said its surveys of pensioners and pension savers showed that principle had been met.
“The freedom of choice in the premium pension means that savers and pensioners can adapt their fund choices to their own needs and preferences,” Schaftenaar said.
The agency noted that since the turn of the year, stock markets had fallen sharply following the “tariff war”, which it said could have major effects on the premium pension system.
The premium pension funds marketplace is in the process of being reformed, with the platform gradually being repopulated with procured, quality-assured funds, which began becoming available since March 2024 following the first mandate awards by the Fund Selection Agency.
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