SWEDEN – Sweden’s Premium Pension Authority, or PPM, is extending its trade processing time amid a surge in the number of funds being switched by investors.
The current system of two days is due to change to three days at the end of the week under new requirements from the Swedish National Debt Office.
PPM chief economist Daniel Barr told IPE: “The size of the fund switches – the number and the amount of switches – has been quite volatile, and the Debt Office now requires PPM to give them the exact amount one day in advance.
“This means that we have to prolong the processing with one day in order to fulfil that requirement. It’s a requirement from the Debt Office.”
The system was not designed for the present volume of fund switches, with investors now increasingly making short-term decisions based on market movements.
In an article in Sweden’s ‘Dagens Industri’ newspaper, Barr said: “We regret that we need to extend the processing time. But it is our bank’s decision.”
PPM told IPE that it has “an understanding” about the change with the Debt Office.
The change is not expected to affect the majority of investors.
Last year, only 8% of members in the system made fund switches. However, roughly 1.2m switches were made – double the 2004 figure. Barr also estimated that there might be as much as a 30% increase in switches in the first quarter of 2006 compared to the same time last year.
According to Barr, there are only a small number of investors that trade and make multiple switches during the year. These investors are likely to be in their 50s with balances above average on their account.
“There have been some complaints from them,” Barr said. However, the shift to a longer processing time will go ahead on Friday regardless of these complaints. “There is no room for discussion. This is an absolute requirement from the Debt Office,” he added.
The extended processing time is not expected to make any impact on the number of switches made.
“We advise people to look at their account and maybe rebalance or make some changes once or twice a year,” said Barr, adding that PPM does not encourage investors making lots of switches.
In January, IPE reported that 5.5m PPM savers enjoyed an average return of 30% in 2005.
Investors can switch funds free of charge at any time via PPM’s website or via phone.
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