Regulatory proposals have been put forward in Sweden that would allow fund manufacturers to also offer tax efficient savings accounts under the regime governing investment savings accounts (investeringssparkonto, ISK).
The proposals have been put forward by an ongoing enquiry making recommendations for the government. The Swedish Investment Fund Association (Fondbolagens förening) has been pushing for this opportunity ever since the savings account regime was launched.
At the time, it was possible for banks and asset managers to offer this type of savings account – which shelters assets in a tax efficient way. For example, capital gains tax is not taken out when funds are sold within the account wrapper. However, the regulations did not allow fund manufacturers to offer this type of account for those who wished to invest directly into a fund. Instead, fund companies were required to refer such customers to a bank or securities institution. The Fund Association said that this created a considerable competitive downside for fund companies in the local fund markets.
The Fund Association noted that the regulations had in practice stopped fund companies from distributing their own funds, to the detriment of market competition. This has had a significant impact on the industry: record low interest rates and changes to tax rules around private pensions means that many long term savers have been attracted to investment savings accounts. The Fund Association estimates that more than half of net new savings in funds went via ISK accounts, while in the segment representing residential household savings into funds, pretty much all new savings went via ISK in the past year.
The proposals to adjust the ISK regime will now go out for consultation ahead of a proposed change in law taking effect by 3 January, 2018.