SWEDEN - Savers would be offered packaged fund portfolios and authorisation to exclude systematically poor performing funds would be handed to the Premium Pension Authority (PPM) under proposals outlined by the authority itself.
Responding to The Premium Pension Committee’s report Difficult waters? Premium pension savings on course, the PPM set down a list of “supplements” to the committee’s proposals, which it claimed would “further simplify savers’ choice, decrease the risk of systematic poor results and reduce the cost of asset management”.
While supporting the aim to reduce the number of funds in the system, currently more than 700, the PPM said the proposals suggested by the committee, headed up by Karl Olof-Hammarkvist, a professor at the Stockholm School of Economics, were “not far-reaching enough”.
The committee favoured simplifying pension savers’ choice by providing decision-making support and by reducing the number of funds in the system by letting market conditions act as a means of control.
PPM said the proposals should be supplemented by:
-Offering packaged fund portfolios put together by the PPM in addition to the funds on the fund market to encourage more savers to choose an individually adjusted risk level for their savings.
-Making the underlying asset class funds of the Sjunde AP-fonden (AP7) available on the PPM fund market, thus allowing the economies of scale in the asset management of the default alternative (equivalent to the Premium Savings Fund) to be utilised by all pension savers.
-Allowing the PPM to prescribe further qualification requirements for fund participation in the system.
-Authorising PPM to exclude systematically poor performing funds.
-Getting the government to determine investment guidelines for the default alternative after a proposal from AP7 and a circulation for industry comment.
In addition, the PPM argued the need for analysis of the alternative set-up suggested by the committee, which was chosen in the occupational pension scheme for government employees in the US (Thrift Savings Plan) and has been proposed in the UK as part of the future public pension system.
“Such a set-up would enable more pension savers to decide risk level for their savings,” the PPM noted in its response. “The costs for the asset management could likely also be halved. If the investments are restricted to index management, the costs for asset management could be reduced to less than 5% of the current costs.”
However it added: “Unlike the committee, PPM is of the opinion that such an analysis is needed before a final decision is taken as to which path to follow. The analysis should therefore be carried out within the framework of the forthcoming governmental processing and illustrate how a possible transition should be handled and what costs it incurs.”
The Pension Protection Fund (PPF) is consulting on proposals to charge a "risk reflective" levy for commercial defined benefit (DB) consolidation vehicles.
The funding gap across FTSE 350 schemes could be slashed by as much as £275bn if schemes look beyond traditional ways of creating value. Victoria Ticha examines how
There will be "many flavours" of defined benefit (DB) consolidators but consolidation will only be the right answer for a minority of schemes, Alan Rubenstein says.
Work and Pensions Committee (WPC) chairman Frank Field has questioned the regulator on what lessons it can learn from the experience of the Kodak Pension Plan No.2 (KPP2).