Stockholm (NordSIP) – At the end of June 2024, the Swedish government published a review of the Swedish pension fund buffer system which argued for increased consolidation of and cooperation between AP1, AP2, AP3, AP4 and AP6. Today, the Swedish government announced its intention to carry out these changes to ensure that the management of the buffer capital in the pension system is more efficient and effective. Among other changes, the government is proposing the merger of AP6 with AP2 and the redistribution of the assets of AP1 into AP3 and AP4.
“We are protecting taxpayers’ money, which is why we are tightening the requirements for boards and merging some funds. Today, there are no fewer than five buffer funds, even though there are obvious economies of scale. This lowers costs and provides better control over the funds’ operations. It benefits everyone who works and pays into this system,” says Minister of Financial Markets Niklas Wykman (Pictured) (translated from Swedish).
Merging AP Funds
The government announced six changes to the present system. The most prominent adjustments refer to a decrease in the number of buffer funds from five to three. However the government also announced its intention to change investment limits in private assets and in Swedish listed companies, as well as details regarding board membership:
- AP6 is to beincorporated into AP2, which will remain in Gothenburg. (Both funds are currently domiciled in Gothenburg.)
- To allow AP2 to take advantage of the expertise acquired by AP6, AP2 will be given expanded opportunities to invest in unlisted assets through 2036.
- The current three buffer funds based in Stockholm (AP1, AP3 and AP4) will become two. The consolidation will be done by distributing the assets in one of the funds equally between the two remaining funds, so that they become of equal size. it is proposed that the assets of the AP1 be transferred in equal parts to the AP3 and AP4.
- The scope to invest in Swedish listed companies is maintained by adjusting the provision that states that buffer funds may own a maximum of 2% of the value of all shares in Swedish listed companies. For the two remaining Stockholm funds, the limit is raised to 3%. The current provision that buffer funds may not own more than 10% of the votes in a Swedish listed company is set to remain.
- The statutory competence requirement for board membership is to be tightened. Boards shall continue to consist of nine people. The provision is adjusted to a maximum of nine members, but only with the aim of better handling temporary vacancies. The right of nomination for the social partners remains.
- In addition, the possibility of using electronic signatures is being introduced in the same way as has been the case for limited companies since 2016, as well as confidentiality in CEO recruitment, similar to what has been the case since 2010 when appointing top managers in other agencies.
The Government will propose that two special investigators be appointed to assist the funds concerned with the implementation of the reorganization, one who will primarily assist the funds in Gothenburg and one in Stockholm. The aim is that the changes shall be implemented by 1 January 2026.
“We are constantly working to protect the interests of pensioners and strengthen pensions. Today’s announcement means that the costs of AP fund management will decrease and the return to pension savers and pensioners can instead increase. It is also positive that the pension group has supported a modernization of the AP funds,” concludes Minister for the Elderly and Social Insurance Anna Tenje, chairwoman of the pension group (translated from Swedish).
NOTE: This article was edited on 12 February to correct an error. It previously stated a decrease in the number of buffer funds from six to three instead of five to three. AP7 is not a buffer fund but the default fund in the premium pension system. The buffer funds are part of the income pension part of the pension system. There are currently only five of them AP1, AP2, AP3, AP4 and AP6.
