Sweden to Shrink Premium Pension Fund Marketplace

    Stockholm (NordSIP) – When the Swedish pension system was reformed in 1999, the creation of the defined contribution premium pension scheme (PPM) created a boom in the local fund industry. In 2000, there were over 500 funds registered in the system. By 2008 there were 83 fund managers operating 773 funds in the PPM marketplace, worth approximately SEK231 billion. However, too much choice and not enough regulation soon started raising concerns that some fund management companies were taking advantage of the PPM market. The issue came to a head in 2017 with the Allra telemarketing scandal, which led to a cross-party agreement in parliament to reform the PPM market place.

    On Wednesday, February 17th, three years after the original agreement, Sweden’s Pension Group announced the details for implementing the December 2017 reformed premium pension system agreement. Among other issues, the deal describes the design of a procured fund market and indicates that it will host at most 150 to 200 funds in total. However, the announcement clarifies that the question of the number of funds will be decided by the new authority in professional procurement. This would represent a significant decrease from the 553 left in the PPM market place at the beginning of 2019.

    Beyond these points, the announcement also states that suitable funds must be cost-effective, sustainable, controllable and of high quality. The term “authority” (“myndigheten”) refers to the new entity that will be established to procure funds for and otherwise manage the premium pension fund marketplace.

    Image by Erich Westendarp from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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