New rules announced for funds seeking PPM distribution – commission banned
The Swedish Pensions Agency has published its new rules for funds seeking to use the PPM fund platform to reach pension savers in the Swedish market, which includes a ban on any commission linked to fund assets in the premium pension system.
Entering into force on 1 November 2018, the new rules also set minimum aum, track record and sustainability requirements.
The Pensions Agency has developed its new rules in response to government and parliamentary inquiries that came after several years of scandals, for example, of pension savers being scammed by abuse of PIN codes and fund providers using EU passporting rules to place funds on the platform that effectively acted as vehicles to funnel money out of the country leading to investor losses.
Any fund provider seeking to participate in the PPM platform will be required to sign up to a new “fund agreement”, that not only affects products but also the provider’s behaviour.
Among the new requirements include:
- At least SEK500m from investors outside the premium pension – meaning funds available via PPM must also be available to non-PPM investors.
- The fund manager shall follow well-defined best practices and code of conduct for the premium pension.
- A minimum of three years of relevant experience, track-record and business activity for the fund manager and for each fund.
- The Swedish Pensions Agency charges fees that cover the cost of processing applications and auditing.
- The fund manager shall act based on the best interests of pension savers.
- Minimum requirements for sustainability work.
- There will be one fund agreement for each fund, replacing the existing cooperation agreements with the fund managers.
Any funds that do not reapply or fail to meet the new requirements will be taken off the platform in 2019, the Pensions Agency said. The deadline for applications is 16.30 on 28 December, 2018.
Erik Fransson, head of the Fund Department at the Swedish Pensions Agency, said: “Quality is improved by higher requirements that we are placing on fund managers. The new fund platform will also involve a higher level of security for savers with clearer rules on best practices, relevance and suitability. If we assess that confidence in a fund is lost then it will not remain on the platform. The requirements for sustainability being introduced are at a minimum level that we will continue to develop.”
Existing long term savers using PPM do not need to take immediate action, however they may find that they need to re-consider their fund choices through 2019, for example, should an existing fund be deregistered because it does not meet the new requirements.
The Swedish Pensions Agency’s website contains further information on the new agreement. There is also an FAQ section that is continually updated. The Agency claims one of the biggest defined contribution pension plans globally, with AUM of some SEK1.2trn (€115bn), and said it accounts for 35% of all new fund savings in Sweden.