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Swedish regulator softens edges of rules for IORP II provisions

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The Swedish financial services authority has announced it will amend its proposed IORP II regulations regarding the calculation of balance sheet provisions for occupational pension funds.

The announcement follows critical responses from several major pension providers to a consultation on the draft proposal for new regulations on occupational pension activities.

In their joint response last month, Folksam, AMF and Alecta said the new rules would negatively affect both pension savers and employers.

The regulator – Finansinspektionen (FI) – has now made a draft addition to its previous proposal, including an amended rule for calculating capital requirements for share price risk and new rules for an alternative method for calculating the long-term forward rate (UFR). This is the rate at the far end of the interest rate curve that pension funds use to determine provisions.

Lars-Åke Vikberg, chief executive of Swedish pension fund SPK, told Danish pensions news service Pensionsnyheterna that infrastructure would, relatively speaking, come out a little better in the new proposal from FI.

“It is good. Infrastructure investment fits very well into pension portfolios, which are naturally very long-term,” he was reported as saying.

It was also positive that the regulator was allowing pension funds a phase-in of the UFR and did not have to apply the EIOPA rate immediately, he said.

“FI has listened to criticism from the referral bodies,” Vikberg said.

FI has set a tight deadline for written comments on the supplementary proposal of 14 October, and also invited parties to make oral submissions directly at a meeting convened for that day.

The new regulations are currently scheduled to enter into force on 1 January 2020.

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