The Swedish financial watchdog is launching a new investigation into the cost of individual occupational pension products, after its government-mandated investment costs mapping exercise revealed these to be considerably more expensive than their collectively-agreed counterparts.
The Swedish Financial Supervisory Authority (Finansinspektionen, FI) yesterday announced the probe as it published a 50-page report into fees and distribution in the Swedish mutual funds market.
FI said: “Customers of big banks often pay more in fund fees, yet 85% of private savings are made through major banks.”
Back in May, FI was instructed by Niklas Wykman, minister for financial markets, to map the fees charged by investment fund providers in Sweden by December in order to press the companies to lower such charges.
Jimmy Kvarnström, head of FI’s markets department, said: “Today, many consumers risk having to pay high fees without receiving corresponding value,” adding that in the long run, this could erode both their savings capital and their confidence in the mutual funds market.
A well-functioning market was based on clear information, the ability to make effective comparisons and healthy competition, he said.
“FI will now take measures that create better conditions to reduce fund fees,” he continued.
On pensions specifically, the authority said there were large differences between fees for collectively-agreed and individual occupational pensions, with most people in the individual sector paying more than they should.
“Employees pay the regular fee even though the employer should have more chance of exposing the fee to competition,” FI said, adding that it believed employers often had an information disadvantage compared to distributors.
“FI will therefore review the market for individual occupational pensions to better understand what determines which funds are chosen, including incentive structures, remuneration systems and advice,” it stated.
Individual occupational pension plans made up roughly a fifth of total savings in Sweden’s occupational pension system in 2024, according to figures from FI and the Swedish Pensions Agency (Pensionsmyndigheten) – encompassing capital of SEK900bn (€82bn) compared to SEK4.86trn for all occupational pensions.
The report shows annual management fees for fund investments in individual occupational pensions are around five times higher than fees for premium pension savings – with the premium pension system shown to have the lowest costs of all types of mandatory Swedish pension.
But even compared to other forms of occupational pension scheme, individual pensions are shown by the FI figures to be far more expensive, at around 1.25% compared to 0.34% for the ITP white-collar occupational scheme.
The first-pillar premium pension system, meanwhile, has an annual management charge of 0.23%, according to the FI’s mapping report.
Regarding mutual fund fees overall, FI said it proposed that the government consider implementing a legislative amendment to ensure consumers had access to a standardised cost template, where all costs for product and distribution were shown in a uniform and comparable way.
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