The Swedish Pensions Agency has unveiled details of the new set of conditions for pension providers operating in the Premium Pension System’s (PPM) fund marketplace, laying the next stepping stone in the reform of the first-pillar system.
The new demands are the result of a parliamentary decision involving several legal changes aimed at creating a safe and sustainable premium pension system, the authority said.
Key changes in the new agreement include a stipulation that companies listing their funds on the fund marketplace (fondtorget) must have at least SEK500m (€47.7m) in capital outside the PPM, and that no commission can be charged on the pension products.
Erik Fransson, head of the Swedish Pensions Agency’s (Pensionsmyndigheten) fund marketplace department, said: “The quality is being improved for pension savers by us making higher demands of fund managers.”
Clearer rules about good practice and suitability would also make the new fund marketplace safer for savers, he said.
“If we judge that trust in a fund has gone, then it should not remain,” Fransson said.
Other requirements being made by the Pensions Agency are that fund managers must follow good practice in the premium pension area and have at least three years of business history.
The agency will charge managers fees to cover the cost of processing applications and auditing.
Fund managers will be specifically required to act in the best interests of pensioners, and must live up to minimum requirements regarding sustainability.
As the agency said back in July when outlining the likely new rules, in future a fund agreement will be required per fund instead of broader cooperation agreements being made with firms managing several funds.
The new agreement will take effect on 1 November, with current and prospective providers having until 28 December at 4pm local time to lodge new applications.
Funds which do not make a new application or which do not fulfil the new conditions will be deregistered from the system next year, the agency said.
Fransson said the sustainability demands now being introduced are a minimum level which the agency will continue to work on.
The new rules for the PPM fund marketplace is the first of a two-stage overhaul, with the second stage scheduled to be completed in 2020.
This second stage of the reform will see the fund marketplace being transformed into a procured system, where investment options for savers are the result of an official tender process.
The PPM is the defined contribution part of the Swedish state pension, in which people can allocate a proportion of contributions to private investment providers using the funds marketplace.
But it has been beset with problems in recent years, mainly because of scandals involving dubious or fraudulent behaviour of fund management firms.
The funds marketplace has more than SEK1.2trn of managed capital, and accounts for 35% of all new savings in investment funds in Sweden, according to the pensions agency.