Swedish govt urged to reconsider procurement of funds in premium pension system

The Swedish Investment Fund Association (SIFA) has called on the Pensions Group and the government to reconsider plans to procure funds to the reformed premium pension fund system.

Following the Swedish Pensions Agency’s (SPA) evaluation of the reformed premium pension fund market that found it to be a safe place for savers, SIFA argued that state fund procurement would increase risk and not be of benefit to Swedish savers.

"The Swedish Pensions Agency can already today make all the desired demands on the price and quality of funds in order for them to be allowed to join the fund square [market],” said SIFA CEO, Fredrik Nordström.

“This means that there are no quality reasons for the Riksdag to go ahead and introduce a state procurement of funds for the square [market].”

Nordström stated that state procurement, where the government would choose “winners” among funds, was a “risky model” that would create new problems for savers.

Furthermore, he warned that procurement would limit the opportunities for savers to choose the alternatives that would suit them best.

“Recurring procurements, where new funds are selected by the state, will also force a move of large volumes of capital,” he added. “This in turn benefits large index funds and can, in the long run, threaten the supply of venture capital to smaller Swedish companies.”

Nordström also warned that the model presented by the inquiry last year was in conflict with EU law, “according to leading Swedish experts in public procurement”, and would need to take place according to the Public Procurement Act.

"In light of the Swedish Pensions Agency's evaluation, we urge the Pensions Group and the government to reconsider the decision to proceed with a government procurement of funds to the premium pension fund marketplace. This is an unnecessary and risky step that would not give Swedish pension savers any benefits," he concluded.

The first step of the reforms to the premium pension system were introduced on 1 November 2018 and contained new requirements for capital, return history, operations, management, marketing, fund changes and risk behaviour, alongside new tools for exercising scrutiny, control and supervision in collaboration with other authorities.

This has lead to a 40 per cent reduction of the number of funds in the market, with the SPA stating it had created strengthened consumer protection, increased confidence in the market, improved the quality of fund offering and created a safer marketplace.

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