The disclosure by the new Swedish Premium Pension Authority (PPM) of its kickback rates for administration of the country's new pensions system has been labelled 'catastrophic' by fund managers, dismayed at 'excessive' charging levels.
At a presentation briefing in Stockholm on December 15, the PPM announced that for the largest funds, kickbacks for the scheme, which will start taking contributions from 4.1m Swedes this autumn, could amount to a maximum 99% of annual fees.
This caused uproar amongst fund managers, with many saying they will have to carefully consider whether to place their funds in the scheme.
Peter Friberg, managing director of Hagströmer & Qviberg asset managers, said the trailer fees were a disaster for the PPM's success: If a large fund sets its management fee at 1.5%, the PPM is saying it may take 1.48% of this back - leaving the manager with two basis points for the transaction. It is just incredible."
And Per Axelson, marketing director of Robur, the fund manager owned by Föreningssparbanken, says the ends of the system no longer justify the means.
"We now have to make a strategic decision if we join the system or not, because the kickback levels leave us with too little to gain. All our local banks that will have to educate and inform our customers about the new pensions system and savings strategies, will be paid nothing for their efforts."
And he is not alone in his criticisms, with both large and small, foreign and domestic fund managers voicing the same profit margin concerns.
Mike Nikou, sales director at Fidelity Investments, Nordic region, said: "We are now looking twice at the situation with these charge levels in mind."
The PPM, however, is qualifying the fee structure, saying they are taking over much of the work normally performed by fund managers.
Hans Jacobson, director general of the PPM, said: "We aim to halve the fee levels common in the private pension market, and this kind of rebate is normal for the kind of services we will be providing."
Jacobson adds that the average fund should be able to keep around 7% of management fees after the kickback, with the PPM charging 0.3% for administration. The PPM proposals state that funds with assets up to Skr50m will enjoy a 'free' fee of 0.25%.
Any fee levels above this will be subject to a 15% rebate to the authority - regardless of the total fee level. And for larger funds the rates increase exponentionally with managers running more than Skr30bn set to receive a 0.01% free fee and a 99% rebate bill.
The fund manager's opinions will now be taken into consideration and a final non-negotiable contract for the PPM drawn up before the end of this month.
Hugh Wheelan and Mikael Nyman"