SWEDEN - The board of Sweden's Premium Pension Authority (PPM) has said proposed reforms to its system could be improved by examining the UK's National Pension Savings Scheme (NPSS) and the US Social Security System.
Discussions about how the PPM reform are ongoing in the Swedish parliament, and have been broadly welcomed by the PPM.
But chief economist Daniel Barr (pictured) told Global Pensions the board would like the government to consider Adair Turner’s NPSS system and George Bush’s proposals for the US savings plan, which both have just a handful of investment options.
The PPM platform is currently home to 740 different funds. Proposals to cut this to between 100 and 200 have been welcomed as 90% of the capital is housed within just 150 funds, pushing up the cost of the system.
“I think Lord Turner was inspired by PPM when suggesting NPSS, but took PPM's advice to reduce the number of investment alternatives,” said Barr. “In the US, president Bush has suggested that individual accounts be introduced in their social security system.”
According to Barr, 8% of PPM pension savers had become more active in the management of the investments in their fund over the course of 2005.
This is significant because a large amount of potential members simply default into the Sjunde AP-fonden (AP7). Indeed, Barr said 90% of newcomers took this route.
Barr said the number of funds switches between 2004 and 2005 doubled from 600,000 to 1.2m, and had been increasing over the first quarter of 2006. This was partly due to booming equity markets, causing people to become more active in trading, he said, plus the fact that amounts on the accounts were rising.
“The average amount today is £3000, whereas before people didn’t care that much about it,” he said.
Another factor was a new service on the PPM website which allows members to give their pin codes to authorised traders to make multiple switches on their behalf, he added.
In related news, the re-balancing model which PPM planned to introduce at the end of 2006 to help apathetic members, as reported by Global Pensions in February, has been delayed until early next year following the finalisation of the production timetable.
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