The Swedish Investment Fund Association has provided further detailed criticism in its consultation period response to proposed changes to the country’s pension fund legislation that could see significant levels of long-term savings switched to a default fund.
As reported earlier by InvestmentEurope (http://www.investmenteurope.net/regions/fund-could-harvest-380bn-ppm-assets/) the changes could affect up to €40bn of savings. Now, the Association goes further by stating that the proposals would contradict established rights grounded in law, lead long-term savers’ money into a fund that they previously de-selected, and would break the original objectives of the established pension system.
“Additionally, [the proposals] would lead to serious consequences for Swedish capital markets and Swedish companies, something not analysed in the [previously published proposals SOU 2016:61],” the Association said.
“The Premium Pension system should be developed rather than run down,” added Fredrik Nordström, Association CEO.
“The original thoughts about a funded system with free choice for savers, access to returns from capital markets and improved diversification of risk has come to be. The Premium Pension system works. To decrease choice or increase state control by contrast risks creating passive households, which, instead of having a good understanding for the factors that influence pension savings, have false expectations and believe that the state takes responsibility for future pension outcomes.”
A key plank in the policy proposed by the Swedish government is that long-term savers and investors in funds that they previously self-selected, would be forcibly moved to the default AP7 fund, depending on certain triggers, such as the number of years during which there is no record of ongoing active selection being made. However, as the Association points out, these savers may have de-selected AP7 in the past, and forcing them back to the default fund would risk leaving them exposed to a portfolio with far higher risk than they are comfortable with, or away from funds with greater adherence to sustainability profiles. The PPM fund platform also offers funds with lower fees than the funds in which the state has a greater say, the Association adds.
The full consultation response, including charted comparisons of returns from self-selected funds versus AP7, is available here (in Swedish): http://www.fondbolagen.se/PageFiles/7833/Remissvar%20Fokus%20premiepension%20SOU%202016_61%20inkl%20r%C3%A4ttslutl%C3%A5tande.docx.pdf