The Swedish Investment Fund Association (Fondbolagens förening) has seized on an official report into the first stage of the country’s sweeping premium pension reform to argue the government need go no further with the overhaul, which is set to slash the number of funds marketed to Swedes in the defined contribution system.
Fredrik Nordström, the lobby group’s chief executive officer, said: “To proceed with proposals for government procurement of funds would not increase security but on the contrary mean greater risks with the pension savers’ money.”
In the first stage of the reform of the first-pillar premium pension system, which took place at the end of 2018, the agency required all firms offering funds via the funds marketplace platform to re-apply and comply with new stricter criteria for inclusion.
In the next and second stage of the process, the funds marketplace is set to be replaced by a procured range of fund options.
On Wednesday, the Swedish Pensions Agency presented a government-commissioned report evaluating the success of the stricter requirements for funds and fund managers already implemented in the premium pension system.
Nordström said: “The Swedish Pensions Agency’s evaluation shows that step one has been successful and that the premium pension fund marketplace is today a safe place for savers.”
The association said the evaluation showed that previous problems with a number of private firms in the system been remedied, and that the agency was already able to make the necessary demands of the price and quality of funds to keep the system running efficiently.
“The only difference a government procurement would lead to is that civil servants will then pick out the funds that pension savers will have access to,” Nordström said.
The association said the planned new model, whereby the state would try to choose winners among funds, was a risky one that would create new problems for pension savers.
Nordström said government procurement would also limit opportunities for savers to choose which alternative investments suited them best, and that recurring procurements would shift large amounts of capital, benefitting large index funds and endangering the supply of venture capital to the country’s small businesses.
In its report, the Swedish Pensions Agency said the stricter requirements for fund managers and funds had lowered the chances of repeats of the type of “irregularities and problems” that had happened on the platform previously.
Confidence in the premium pension system, and thus its legitimacy, had increased, the agency said in the report.
However, the agency also indicated that further measures were needed.
“Despite stricter requirements for funds and fund managers and strengthened consumer protection in the fund market, the Swedish Pensions Agency considers that the current rules are not effective in the long term,” it said.
This was mainly because the fund industry was innovative and changing, which was basically positive in itself, but also meant the platform could be exploited by unscrupulous actors.
Given the current affiliation-based nature of the funds platform, the agency said it could not control the number of funds, and that having an increasing number of offerings complicated the overview for savers.
“It is therefore the Swedish Pensions Agency’s wish that the requirements from step one be followed by additional requirements in order to adequately address the above limitations,” it said in the summary section of the report.
The number of funds on the funds marketplace has fallen to around 490 funds currently from 810 funds on 31 December 2018, according to the report.