EUROPE - The Swedish regulator has fined Folksam LO Fond - a fund jointly owned by pension and insurance provider Folksam and LO, the country’s largest blue-collar union - for shortcomings in its internal controls.

The watchdog levied the SEK6m (€660,000) fine after an investigation in 2010 that looked into regulatory compliance at Folksam.

The regulator said Folksam had been organised in a way that made efficient monitoring difficult.

It said its investigation revealed failures in the identification and handling of conflict of interest in the company.

The watchdog said it also found internal-auditing flaws, and that Folksam LO Fond lacked the necessary procedures to tackle money laundering.

The Folksam LO Fond had SEK22bn-23bn between 2007 and 2011, the period of the investigation.

In a statement, Folksam said it agreed with the regulator and had already implemented a number of improvement measures, such as a new independent chairman of the board and independent members of the board, as well as a new chief executive.

In other news, the average weighted total return for Swedish life and pensions companies was 2.8% for the first quarter.

According to statistics from Insurance Sweden (Svensk Försäkring), the best performing product was Alecta Optimal Pension, which was up 8.9% over the period, followed by Länsförsäkringar’s LF Nya Världen, which invests in emerging markets, with 8.1%.

Meanwhile, the structure of occupational pension agreements in Sweden makes it difficult for employees to work beyond retirement age, according to a report from the Swedish Social Insurance Inspectorate (ISF).

The report said the systemic effects, under certain circumstances, could increase the costs for employers to retain older staff.

According to the ISF, the set-up in pension premiums is such that it increases costs for older, well-paid employees.

Because of this and favourable tax rules, employers might be tempted to exchange older employees for younger ones, it said.

Another issue with the agreements is that defined benefit pensions become very costly for the last employer, as pensions are based on the final salary, reducing flexibility in the workplace for older employees, the report said.

Lastly, Brummer Life - the life and pensions arm of hedge fund provider Brummer & Partners - has written to occupational pensions board ITP Nämnden, calling on the government to scrap requirements for “traditional” products with guaranteed returns.

Currently, the law requires at least half of occupational pension premiums to be invested in traditional products.

But Brummer Life argued that it was increasingly difficult for these types of products to deliver attractive returns, due to rising capital or solvency ratios and falling government bond yields.

It said traditional products should instead focus on “alpha-generation”.

It said passive investments should be combined with alpha funds to reduce fees compared with traditional funds while at the same time improving conditions for stable returns.

But AMF, one of Sweden’s largest pension providers, rejected Brummer Life’s assessment.

In an open letter AMF, pointed out that traditional products were invested in asset classes deemed to offer the best long-term returns relative to risk under the prevailing economic climate.

It also argued that few savings products had the same investment freedom these products offered.

It conceded that hedge funds also offered great investment freedom, but it denied they had the necessary capital requirements to safeguard the pensions guarantee.

AMF also argued that fees were already low for these products, and that the company - like many of its - rivals gave all profits back to the customers, a claim few hedge funds could make.

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