A report into Sweden’s premium pension system has concluded that the system does need to be reformed and its proposals should be implemented no later than December 2023.

Special investigator, Mikael Westberg, submitted the report, A better premium pension system, to Social Security Minister, Ardalan Shekarabi today, 4 November.

Shekarabi said: “The pension group agrees that the premium pension system should be reformed. The state must take greater responsibility for a safer system and good pensions. The inquiry has today presented proposals that we will now continue to work with within the government offices and the pension group.”

The premium pension is one of three elements of Sweden’s public pensions, and is a funded part, administered by the state Premium Pension Authority. Savers' contributions are deposited into individual investment accounts and they have the option to choose what funds they would like their money invested in.

According to the report, the premium pension system should be designed so that it is only savers who really want to put together their own fund portfolios that do so. The report finds that preselection should be the starting point for all savers, and no activity or financial knowledge should be required, with savers being allowed to choose the level of risk they wish to take on.

However, if the saver does want to choose more than just the level of risk, the framework should allow them the opportunity to choose one more fund categories to place their funds.

The report proposes that the current open fund square be replaced by a procured fund square where a special principal is responsible for ensuring that there is sufficient freedom of choice among controlled funds of good quality. The selection of funds shall be made through a statutory procurement procedure.

Furthermore, the goal for the premium pension in the future should be to provide savers a return that is higher than the change in the income index but without guarantees for the return, deliver a stable premium pension during the payout period, and maintain the right for individuals to influence the level of risk and the investment orientation.

The inquiry has also proposed that the Seventh AP Fund be given more information and change its name to the Authority for the Premium Pension Fund Management. This rebranded fund would be independent from the government and be tasked with managing the pre-election in the premium pension, managing the new procured fund square, managing the asset management of the traditional insurance, and managing the premium pension's election architecture.

Other tasks within the premium pension system shall, as at present, be handled by the Pensions Authority.

“The new authority should work for the existing fund square to be liquidated and replaced by a procured fund square no later than December 31, 2023,” the report said. However, the pension group, which consists of representatives from various political parties, to set up a new system by January 2021.

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