SWEDEN - Sweden's Premium Pension Authority, the Premier pensionsmyndigheten (PPM), has advocated abolishing the 655 funds from which savers choose in the National Pension Scheme and instead having the PPM autonomously mandate a far smaller number of managers to run the e9.1bn in the system.
Speaking exclusively to IPN’s sister publication, Global Pensions, Hans Jacobson, PPM director general, said apathy among savers who abdicated responsibility to make an active choice of fund managers meant far too much money (32%) was flowing to the default fund, AP7.
He said: “You wouldn’t need to have a default fund, you wouldn’t need to have the seventh AP fund.
“Instead you could have a standard or default profile, perhaps depending on their age and then they could be free to change their profile. There is a tension between the system and the default fund. There is a feeling if the default fund just keeps growing more and more people are neglecting their freedom of choice. This would become a threat to the system.”
He added that it was a common misperception that AP7 had performed best.
AP7 declined to comment on Jacobson’s remarks, but did say, “we have in our communication with the media been very clear that AP7 has decreased its assets since the start but has been better than the average PPM fund.”
Former finance minister and head of the Swedish national debt office Thomas Franzén has just become chairman of PPM’s board. He has said 655 funds is too much choice and confuses savers.
Jacobson said PPM would be able to bargain for lower management fees from the fewer managers it picked with the advice of investment consultants.
He added of the current system: “It is not the choice of the manager that is the important choice, the important thing is where do you want to invest your money – equities, bonds, domestic, international?”
P.O. Öst, head of marketing at Carlson Investment Management, Sweden’s largest pension fund manager, said of Jacobson’s proposals: “This idea I haven’t heard of [but] it’s like volunteering yourself for the firing squad because from time to time they [PPM] would choose the wrong fund manager.”
He said the idea smacked of a “Big Brother society” that removed freedom from people’s lives.
Bengt Edström, head of life and pensions at Stockholm-based Vattenfall Insurance, agreed.
He said the proposal was “social engineering ... the idea that PPM should select a fund for you from the answer of a number of parameters is, to say the least, silly.”
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