Returns from the PPM share of Sweden’s public pension system are better than returns through the ‘income pension’ share, according to a report published by the Swedish Investment Fund Association.
This matters because under the Swedish system, employees are obliged to save in three ways, to fund the income, premium (PPM) and guarantee pension, while those born between 1938-1953 may be entitled to supplementary pensions rights. The PPM part allows for self-selection of funds on what has been the country’s biggest fund platform accessible by the retail end of the market, but which in recent months has become subject to a considerable amount of government and industry focus that is set to result in regulatory regime changes for both fund provider firms and end platform users. (See below)
According to Sifa’s latest report on PPM (in Swedish) – Fakta om premiepensionen 2017 – the value of returns from the PPM system has been “very competitive” and that the system overall is cost efficient for its users. And it adds that users, particularly younger ones, appreciate the ability to make their own choices of which funds in which to invest their share of earnings that the regulatory regime requires all workers to contribute via PPM.
The data suggests that since inception, PPM has provided average returns of 6.7% annually, through a number of cycles and financial crises, versus 3% for the income pension part of the public pension. Also, the average cost paid by PPM platform users by way of fund fees stands at 0.23%, once rebates are calculated into the costs, Sifa notes.
Sifa argues that the evidence gathered in its report points to PPM achieving its key objectives, which include access to better returns, better diversification of risk and the ability to make choices according to one’s own wishes.