SWEDEN - The development of a new pension authority to cover both the state pension and the Premium Pension savings will be a “golden opportunity to increase knowledge and interest on pensions”, the Premium Pension Authority (PPM) has claimed. 

In its 2008 annual report, the PPM admitted its communication policy has not been good enough in highlighting its work to pension savers, as it had believed the “results would speak for themselves” but acknowledged some critics claim the PPM is “expensive and slow” when “the facts show this is not true”.

It suggested this is an important issue to pass on to the new authority, which will be operating from 1 January 2010 and will combine the PPM with the administration of old-age pensions carried out by the Försäkringskassan, the Swedish Social Insurance Authority (SSIA).

The report noted surveys by PPM and the SSIA showed while 91% of people remember receiving the annual Orange Envelope benefit statement, only 78% opened the envelope and just 63% read the content, of which 68% found the information useful.

The report - which confirmed earlier figures showed the value of the total PPM holdings dropped 34.5% in 2008 - said in addition to the new authority the PPM is beginning and will eventually hand over work on a number of proposed changes to be implemented from May 2010, which include the introduction of ‘generational’ funds into the default Premiesparfonden and allow members who previously made an active fund choice to also choose the default. (See earlier IPE articles: PPM overhaul offers a better choice and Swedish default fund loses over a third)

Johan Hellman, director-general of the PPM, said there is “relatively large ignorance and uncertainty” about everything related to pensions units, particularly among younger people, but claimed with the “new pension authority and improvements in the premium pension system, it should be a golden opportunity to increase knowledge and interest on pensions”.

Figures also showed the PPM delivered a loss of SEK100m (€9.19m) in 2008, as the average yield was -34.5%, while in traditional insurance - similar to annuities - the return was -2%, resulting in a fund value of SEK231bn, down from SEK308bn in 2007. 

The value of assets in traditional insurance contracts increased from SEK1.3bn to SEK1.7bn, while the number of fund changes made by members increased by 24% to 3.2 million, and the proportion of ‘active’ savers fell slightly in 2008 from 57.5% to 57% albeit their share of the fund capital increased to 72.8%, as on average they had a better return.

PPM also revealed it excluded the first fund from the system, over a breach of contract, as it claimed Sampo repeatedly violated several administrative commitments, so savers within the fund either chose another fund or those who did not make a choice were moved to similar funds managed by Danske Bank, the owner of Sampo.
 
The PPM revealed the allocation of its holdings at the end of 2008, including in the default fund, was 52.3% in global shares, 22.4% in Swedish equities, 23% in bonds and cash and 2.3% in alternatives. 

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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