The Swedish Pensions Agency, which runs the country’s first-pillar premium pension system of individual accounts, has said in its latest report that it finds no link for savers between switching funds frequently and value creation.
In its new 2019 report on the SEK1.5tn (€141bn) system, the authority (Pensionsmyndigheten) also said people had become less active in exercising their freedom to change in and out of investment funds, with only 3.9% of participants making any switches in 2019 compared with 4.5% the year before.
The findings may be seen as supporting arguments in favour of reducing the number of private funds being offered to the public on the system’s funds marketplace (fondtorget) platform – a development which is happening as part of Sweden’s ongoing reform of its premium pension system.
In the report, the agency said: “In a longer perspective, the number of fund changes has been declining since a decade ago.”
The number of people making at least one change of fund in a year had decreased since 2011, it reported, while the number of people with their own portfolio – as opposed to those saving via the system’s Såfa default option run by national pension fund AP7 – had remained relatively stable in the period.
Analysing the relationship between overall investment performance and an individual saver’s behaviour in switching between funds, the pensions agency said: “There is no clear connection between the number of fund changes and the value development in the account.”
Sets of data in the report for 2019 on its own, as well as for the period since an individual had entered the system, both showed value development to be relatively evenly distributed in all categories of fund changes, and that there was no clear link between increased activity and increased value development.
“Further analysis is required to investigate any possible relationships,” the agency said.
The report showed premium pension savings grew by 28.5% on average in 2019 for savers with their own portfolio, while Såfa accounts had increased by an average of 30.7%.
However, by the end of April the market value of premium pension savings in 2020 had fallen by 9%, the agency reported.