Retirement report sparks reaction from Swedish Investment Fund Association
The Swedish Investment Fund Association (Fondbolagens Förening) has reacted to a new report into charges applied to pension investments by stating long term savers need to not just to compare costs but also returns achieved.
Fund charges have been highlighted for many years now, the Association said today in its response to a report published yesterday, 28 March by occupational pension specialist Alecta.
The report – Rovdriften på pensionsspararna – suggests that in the Swedish pensions market “five in six investors are not fully aware of what charges are actually being taken out on their occupational pension.”
“An even greater number find it hard to gain oversight into what the charges mean over time. At a level of 2% a third of the retirement capital disappears. At 3.5%, for example, in fund of funds solutions, half disappears,” Alecta stated.
Alecta, an occupational pension specialist since 1917, said that the problem was particularly acute for those not covered by collective bargaining in the workplace. It called for tougher rules to ensure long term savers were more aware of the costs being deducted from their capital invested – to avoid situations whereby people with similar amounts of capital invested ended up with sharply different pensions in retirement.
However, Pia Nilsson, managing director of the Swedish Investment Fund Association, said that looking at costs alone did not describe the entire situation.
“You can’t have price comparisons without also taking account of what you actually get for your money. That is why it is a good idea to show for the past 10 years what both the price and the real increase in value have been,” she said.
“What is very important is that when comparing funds the charges are always deducted when returns are shown. That means equivalent returns are always equally good for the fund investor, regardless of what charges have been applied. A higher charge will hit returns. This type of saving is transparent for the investor. It does not apply to other types, for example, traditional life insurance [products], which show returns without reference to charges.”
“The Association believes that it would be good for everybody if not only funds can be compared between themselves, but also that other types of savings can be compared.”