The head of Sweden’s SPP — part of Norway’s Storebrand financial group — has voiced objections to reforms that could see a large-scale shift of capital towards default provider AP7.
Under new proposals, individual savers in Sweden’s Premium Pension System would be required to re-evaluate their fund choice every seven years, a change which the country’s Premium Pensions Committee said could mean up to SEK380bn (€40bn) flowing to AP7 as the default provider.
Åsa Wallenberg, chief executive of SPP Fonder, said: “To assume that the default alternative AP7 Såfa is the option that will give the best return in the future is remarkable in itself.” She further argued that no one knew what future investment returns would be.
SPP Fonder said in a statement that the draft reform proposal did not fulfil its aim. It was responding to the public consultation on the proposals, published by the committee in September.
SPP Fonder is a provider of premium pension fund products and a member of the Swedish Investment Funds Association (Fondbolagens förening), and said its statement should be seen as an addition to the association’s submission to the consultation which ended at the beginning of this month.
The group said the aim of the proposal — according to its wording — was to increase the likelihood that more pension savers would get a better premium pension outcome, as defined by better long-term returns at reasonable risk and cost, while retaining wide freedom of choice between fund managers and funds.
“The proposal particularly hits the sustainable fund offering hard, and absolutely does not increase free choice,” Wallenberg said. “The proposal goes directly against the outcome that the Finance Ministry and the government actually wants, which is to direct the capital and allow it to work towards a more sustainable societal development.”
The firm also objected to a proposal stating that, if savers did not re-acknowledge their existing investment selection, then all of their capital would be transferred to AP7’s Såfa default fund.
“Generally, we think it is unfortunate that the rules and guidelines politicians have set up both around information and guidance — which we usually call advice — differ between the normal funds market and AP7’s Såfa,” she said.
The premium pension is a defined contribution system introduced in 1999, and is part of Sweden’s mandatory public pension system.
It is meant to let Swedes choose how 2.5% of their pensionable earnings is invested.