SWEDEN - Sweden's Premium Pension Authority, the Premier pensionsmyndigheten (PPM) is poised to unveil a new model which will help individual savers to make "rational and reasonable" choices in selecting funds.
Currently, savers have to choose from 655 funds in the National Pension Scheme and critics of the system have said that so much choice confuses savers who abdicate responsibility by opting for the default fund AP7.
A new government committee to be set up in spring is expected to examine the premium pensions system and recommend possible changes. The PPM had advocated abolishing the 655 funds and instead autonomously mandating a far smaller numbers of managers to run e94bn in the system.
Hans Jacobson (pictured), PPM director general said: “We are hoping to introduce a new investment model this summer where there would be 10-20 model portfolios. Individuals will have to answer a scheduled number of questions such as how they feel about risk, how old they are, what kind of retirement income they expect etc and based on that the model will suggest what sort of portfolio the individual can opt for - say 60% equities, 30% bonds and so on.”
He added that if savers wanted further choice - funds that have lowest fees, funds with the best performance in the past five years, then the system could provide 5-10 of these funds.
“The government, parliament and our board are very insistent that we should not give advice. But our job is that without giving that sort of advice, we take into consideration the factors that are of importance,” he said.
AP7 currently invests 90% of its funds in equities. Jacobson points out that most of those who default into the fund, have no idea how their money is invested.
“I have no ambition to take money away from the AP7. If, after going through this process, people decide, yes AP7 is the fund I want then, that is fine. I just want them to know what's happening to their money. We want to make this choice easier for everyone, not only for people in the default fund but also people who have made a choice but want to review their portfolios,” he added.
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