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Sweden to review costs, fund options in premium pension system

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Sweden is to review its defined contribution premium pension system (PPM), with the report set to investigate the impact of maintaining the status quo or reducing the number of fund options from the hundreds to 10.

Pensionsgruppen – the cross-party group that considers pension reform – said last week that a review had been agreed that would examine the two options outlined in a report published last year.

The report at the time said retaining the current system largely unchanged would prioritise a saver’s freedom of choice, but it recommended that savers be required to reaffirm their fund choice in a system that has more than 800 investment options.

The more radical proposal put forward last year by Stefan Engström – to limit investment options to 10 funds, likely coordinated with AP7’s default Såfa investment option – would also be investigated, with the impact of the reforms examined by the committee and an emphasis on option one.

While the government has yet to set out the precise terms of reference for the review, Pensionsgruppen said in a statement it would examine a number of ways of improving the PPM.

As a result, the investigation will examine the legal hurdles to a number of reforms, including allowing the Swedish Pensions Agency, Pensionsmyndigheten, to flag up AP7 Såfa as the best option for investors with little or no financial expertise.

Furthermore, the commission will also look at limiting the number of total fund options available to savers, and ways of making the PPM fund supermarket more transparent.

Finally, it will also examine how feasible it would be to charge PPM savers fees dependant on how often they use the system’s fund supermarket. 

A spokesman for Ulf Kristersson, who, as minister for social security chairs Pensionsgruppen, said it had yet to set a deadline for the delivery of the report.

The spokesman also said no decision had been reached on who would chair the investigation.

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