The Swedish Financial Supervisory Authority (Finansinspektionen, FI) has today ( 14 February) dropped a bomshell into the consultation process around the future of the PPM fund platform serving long term savers in Sweden's pension system, when it argued that 10-15 funds would be sufficient for users - the platform at one stage had more than 800 funds to select from.
FI said in its consultation response (to https://www.fi.se/contentassets/a43a36d59e1b4578aacb104544ccebc0/remissvar-ett-battre-premiepensionssystem.pdf) that the Premium Pension system ought to be subject to a complete revamp and significantly restrict the choice of funds in order to improve protection for those saving for retirement.
"FI welcomes the inquiry's proposals overall as an important step in the right direction, but the range of funds needs to be reduced significantly in order to meet the high levels of consumer protection that ought to be implemented in the Premium Pension system," the regulator stated.
"Instead of todays system, the fund platorm ought to only allow a very few funds, around 10-15, with different risk levels. That equates to about 10% of the range that is expected to result from the inquiry's proposals. FI considers that this would be a better solution to secure consumer protection and be better adjusted to the character of the Premium Pension."
"A small number of funds would also significantly simplify the management of the system and effectively counter the possibility of unserious players accessing pensions savers' money."
The proposals from FI suggest a flat rejection of the position put forward by the local fund industy via the Swedish Investment Fund Association. Its own response to the consultation earlier in the week (https://www.investmenteurope.net/news/4010646/lower-pensions-result-proposed-ppm-changes-warns-swedish-funds-association) warned that significantly limiting the range of funds on the PPM platform, whilst also putting public sector employees in charge of overseeing and reviewing the choices made by platform users themselves, could lead to significantly poorer investment outcomes over the long term.
The proposals to change the Premium Pension system have come as a result of the Swedish Parliament voting to institute changes intended to provide significantly higher levels of protection to users in the wake of misuse and even alleged outright fraud by fund providers and intermediaries over the past decade. Under Swedish law, a proportion of earnings are automatically deducted from workers and put towards the Premium Pension, originally with the idea that they could select from a wide range of funds beyond the default AP7 buffer fund.
Under the proposals out for consultation, AP7 would be changed into a statutory authority, which would take over the role currently perfomed by the Swedish Pensions Agency.