The Swedish premium pension system
The premium pension is part of the Swedish state pension and is thus part of the Swedish social insurance system. The Swedish Fund Selection Agency procures funds for the premium pension fund selection platform and reviews fund managers and funds.
The premium pension
The premium pension is part of the Swedish state pension and is a thus part of the Swedish social insurance system whose aim is to guarantee Swedish citizens’ financial security in their retirement years. It can be described as a mandatory defined contribution system where every year, 2.5 percent of your pensionable income and other taxable benefits are allocated to the premium pension, to a mandatory savings account administered by the Swedish Pensions Agency.
The premium pension system was launched in the late 90’s, in the beginning of 2022, the assets amounted to around 200 billion euros. It is a system with inflows larger than outflows, and in 2040, the assets are expected to amount to around 400 billion euros.
The Swedish Pensions Agency is a unitholder in the funds and is the insurer of the premium pension. The funded system means that the saver has the option to choose the level of risk and strategy for the savings. For those who do not make their own fund selection, their premium pension capital will be invested in the preselected government option, AP7 Såfa.
The pension saver can opt to have his or her premium pension capital invested in up to five funds on the premium pension fund selection platform. One may select and exchange funds as often as one wishes without cost to the pension saver. If one exchanges funds and the previous fund exchange is not yet completed, the trade is carried out as soon as the preceding exchange has been completed. A fund exchange normally takes 2–3 days to carry out.
Two authorities with different responsibilities for the premium pension
The Swedish Pensions Agency will be the host authority for the Fund Selection Agency. It is the Fund Selection Agency that procures funds for the premium pension’s fund selection platform, enters into fund agreements, reviews fund managers and ensures that the funds that are to be offered to the pension savers satisfy the requirements and comply with the agreements. The aim is to create a more secure fund selection platform, higher quality and better returns, and to enable efficient review of the funds.
The Swedish Pensions Agency will also continue to be responsible for administrating fund trading, providing information to pension savers and handling pension savers’ accounts.
The fund agreements that have been signed with the Swedish Pensions Agency according to the older regulations will continue to apply with the same conditions as previously until the relevant fund category has been procured by the Fund Selection Agency. As of 20 June 2022, however, it is the Fund Selection Agency that will represent the Government in relation to these older fund contracts and carry out the review of the fund managers and the funds. Since the Government is a single legal person, however, no formal change of parties will take place.
The Swedish Pensions Agency will continue to be the insurer for the premium pension, acquire and redeem units in the funds, and provide fund information to pension savers. For the individual pension saver, this implies that trading in the funds will be carried out in the same way as currently. The Swedish Pensions Agency will also continue to be the unitholder with the same accounts as previously.