Politician wrong about PPM, says Swedish Investment Fund Association

Stefan Löfven, leader of the opposition Social Democrats in Sweden, has been criticised by Fondbolagens förening, the Swedish Investment Fund Association over his apparent call to put an end to the country’s Premium Pension (PPM) system.

The Association said that Löfven was “mis-informed” about PPM, and that he ought to adopt a better set of facts to support his position on the system.

“If it were the case that the [PPM] system was costly and bad then I would understand the statement,” Association CEO Pia Nilsson said.

On the contrary, she added, the system has been surprising good despite the many financial crises since it was introduced.

“It is PPM that offers opportunities for future pensioners, which is of great importance now that more of us are living ever longer,” Nilsson added.

The Association is set to publish new figures from a TNS Sifo Prospera survey, indicating the level of interest in PPM among Swedes. This data will also be divided according to party affiliation.

Initial analysis suggests that a majority of those who today say they will vote for the Social Democrats also say that they appreciate the ability to select funds for their PPM accounts, and indeed have made such choices. Only among supporters of Vänsterpartiet (the “Left” Party) is there a majority in favour of the state providing all retirement support.

The Association points to particular ongoing successes of the PPM system.
It notes that since 2000 the average annual return in the system has been 3.5%, or 4.1% if the first half of 2013 is included, compared to an increase in the average value of earnings linked pensions of 2.9%.

As for the figure of “just 2%” of Swedes who care for PPM, put forward by Löfven’s political colleague Leif Pagrotsky over the past week, the Association said that the figure is based on statistics showing that just 2% of the youngest long term savers execute fund selection within two weeks of receiving their first so-called ‘Orange Envelope’ – the annual reminder of fund choices made, and returns achieved.

“Among 30-year-olds some 40% have made a choice, and they account for 74% of the capital in the [PPM] system,” Nilsson said.

“These are figures that speak for themselves. That those who have just entered the system, perhaps after earning a few thousand krona in their first summer job haven’t yet made choices [of funds] is not a problem.”

Other figures provided by the Association suggest PPM is among the least costly forms of saving via collective investments. The average rebate is about two-thirds of fees, resulting in an average fund charge of 0.3%. The cost to related authorities is around 0.12%, but this is expected to halve in coming years as the investment in the system has already been done.

Nilsson admitted that improvements in the system are required, particularly on the issue of aggressive marketing under the banner of “advisors”.

Löfven’s views count because the starting gun has effectively gone on next year’s general election in Sweden, following statements over the summer by both himself and current prime minister Fredrik Reinfeldt, setting out specific policies to attract voters.

Since Löfven became party leader early in 2012, the Social Democrats have recovered significant ground in polls, compared to its position under its previous leader. Many political pundits expect that he could become the country’s next prime minister when elections are held in September 2014, particularly as certain parties in the incumbent ruling coalition have seen collapsing support among voters over the past year.

Latest odds published by bookmakers such as Ladbrokes suggests that a coalition of the Social Democrats, the Swedish Green Party and Vänsterpartiet will win the next election.


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