SWEDEN - Managers that fail to achieve a specified market share of Sweden's Premium Pension Authority (PPM) may be booted from the system under a raft of reforms proposed to cut down the 700 plus funds registered in the system. In its report 'Difficult waters? Premium pension savings on course', presented to minister of finance Sven Erik Osterberg this week, the government-commissioned committee set up to review changes to the PPM also recommended charging managers both entrance and annual fees to participate, as reported by Global Pensions in October. While the report, led by Professor Karl-Olof Hammarkvist (pictured) of the Stockholm School of Economics, did not specify charges, it referred to the Danish Folkeboersen, which charges an entrance fee of DKR15,000 and DKR12,000 annually. It should be possible to introduce the option of setting a time limit within which a fund should achieve a certain market share in the system, the report noted. Funds that cannot meet the time limit would subsequently be excluded from the selection. The long term aim is to cut the number of funds to between 100 and 200.
The report also suggested introducing a generation fund profile for the default fund, AP7, so that risk levels decline as the pension saver gets older, and lifting rules which restrict savers from actively choosing AP7. Commenting on the proposed fee structure, Johan Elmquist, head of business development, Nordic region, T.Rowe Price, said: It appears to be an effective way of getting rid of funds with less than SKR50m, they will disappear. I think the system in Denmark is an indication of the [fee] level we will see in Sweden. For those managers with 20 funds on the platform I expect it will most likely at least reduce the number of funds on offer. In other key recommendations, the committee proposed pension savers receive decision-making support when selecting funds, and be given so-called wake-up calls if the risk within their account becomes too high. The use of external sources like Morningstar or other ratings agencies was also flagged up as a means of providing fund performance data for savers. Under the PPM, which acts as a unit-linked insurance company, savers carry investment risks and make investment decisions with asset management conducted in investment funds handled by independent fund managers.
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