SWEDEN - The Swedish government is on the cusp of slashing the number of funds in the premium pensions system to cut costs and increase active choice among savers.
The system has come under fire recently for the large number of funds – 655 funds – that savers have to choose from, considered to be the biggest impediment to informed and active member choice.
The minister for financial markets, Gunnar Lund, said that there is a “significant possibility” that the number of funds in the PPM system will be reduced.
Finance ministry officials added that the number of funds that savers would have to choose from could be reduced to as few as 10.
The government’s move comes after the chief of the e21bn AMF Pension, Christer Elmahagen, dismissed the premium pensions system as an “expensive flop” which was “on the brink of collapse”.
Elmahagen also criticised the government instituted enquiry into the system, saying that it just another method to fob off critics.
He said: “Swedish governments often set up enquiries to look into things. When the matter is revisited in a few years, very little would have been done.
The government has been resting on this issue for far too long.”
Reacting to Elmahagen’s comments, Lund said: “I am very surprised that a knowledgeable person such as Elmahagen does not know that we have set up an enquiry which will examine all the issues that he raises.”
This latest controversy is yet another blow to the system which has already been besieged by problems. Soon after the announcement of the new enquiry into the system, the government announced the replacement of the director-general of the premium pension authority (PPM).
The government said that it would not renew the term of Hans Jacobson after his six-year stint as director-general comes to an end this September and Christina Lindenius, director general and head of department for financial markets at the ministry of finance, has been appointed as the PPM’s new director general for the next six years.
The new appointment raised several eyebrows in Sweden as the outgoing PPM director-general Hans Jacobson is widely regarded as the architect of the system and is known to have expressed a desire to continue in the post.
“A lot of people were taken aback with this development as the post of director-general is usually renewed after the completion of the first term,” said one government official who refused to be named. “In this case, Jacobson has been closely associated with drafting the guidelines and the legislation governing the system, so he was expected to carry on.”
A recent National Audit Office Report was also sharply critical of the system citing poor management and failure to reach goals. The report said that costs of the system were also very high.
“The system clearly lacks efficiency,” said another official. “The government is looking to overhaul the entire system and last year the chairman of the PPM was replaced so this year it is Jacobson. This is the price that he has to pay as he is responsible for the system. He is also a lawyer and the government has shown a clear preference for someone with a financial background.”
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