the swed i sh premium pension system
DESCRIPTION
THE SWED I SH PREMIUM PENSION SYSTEM. Daniel Barr, Chief Economist. DISPOSITION. From DB-land to DC-country Activity Performance. FROM DB TO DC. AFP (flat rate pension). ATP DB PAYG (related to 15 best income years). FORMER STRUCTURE. First Pillar. Second Pillar. Third Pillar. - PowerPoint PPT PresentationTRANSCRIPT
UK Visit Feb 2006 1
THE SWEDISH PREMIUM PENSION SYSTEM
Daniel Barr,
Chief Economist
UK Visit Feb 2006 2
DISPOSITION• From DB-land to DC-country
• Activity
• Performance
UK Visit Feb 2006 3
FROM DB TO DC
UK Visit Feb 2006 4
FORMER STRUCTUREFirst Pillar Second Pillar Third Pillar
Occupational schemes (DB, 90% coverage)
Tax efficient individual pensions (incl. mutual funds, unit linked)
AFP (flat rate pension)
ATP DB PAYG
(related to 15 best income years)
UK Visit Feb 2006 5
REFORMED NATIONAL PENSION SYSTEM
Premium pension (DC,funded) 2,5%
Income pension (NDC, PAYG) 16 %
Guaranteed pension (filling up)
UK Visit Feb 2006 6
INCOME PENSION• PAYG ”Notional DC”• Contribution 16 percent of capped income.• Paid into individual notional accounts and indexed
to average earnings
UK Visit Feb 2006 7
THE SWEDISH PENSION SYSTEM
First Pillar Second Pillar Third Pillar
Tax efficient individual pensions (incl. mutual funds, unit linked)
Occupational schemes (90% coverage, to a larger extent DC)
Income Pension (PAYG)
Premium Pension(DC, funded)
GuaranteedPension(filling up) Members
choice
UK Visit Feb 2006 8
PREMIUM PENSION
• Individuals can choose maximum 5 mutual funds
• Default fund invest on behalf of passive individuals
UK Visit Feb 2006 9
”The Clearinghouse Model”Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund manager
Fund manager
Fund manager
PPM
Approx. 5,7 million pension savers
UK Visit Feb 2006 10
OPEN ARCHITECTURE
• Meet the requirements in the UCITS-directive (85/611/EEG)
780 funds 83 fund companies
UK Visit Feb 2006 11
ACTIVITY
UK Visit Feb 2006 12
NEW COMERS
Proportion of new members that made an active choice
Year 2000 2001 2002 2003 2004 2005 2006
Active 67,0% 27,6 % 14,1% 8,3% 9,4 % 8,0% 7,4 %
UK Visit Feb 2006 13
SAME TREND IN OCCUPATIONAL SCHEMES
60%
33% 33%
24% 23% 22%
17%
31%29,7%
27,70%
23,90%
17,60%
14,10%
8,40% 9,40%
64%
36%34%
61,5%
65,10%
0%
10%
20%
30%
40%
50%
60%
70%
1998 1999 2000 2001 2002 2003 2004
SAF/LO
PFA-98
Premiepension
PA03
UK Visit Feb 2006 14
Active members share increases
50%
55%
60%
65%
70%
75%
2000 2001 2002 2003 2004 2005 2006
Individuals Capital
UK Visit Feb 2006 15
ACTIVITY IN 401k-PLANS
UK Visit Feb 2006 16
FUND SWITCHES
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
1 800 000
2 000 000
2000 2001 2002 2003 2004 2005 2006
UK Visit Feb 2006 17
Top ten funds 2006 (2000)
Fund Market Value Market Share
1 (1) Premiesparfonden (Default) 78 857 410 995 29,5%
2 (5) AMF Pensions Aktiefond - Sverige 9 210 050 130 3,4%
3 (3) AMF Pensions Aktiefond - Världen 7 905 309 778 3,0%
4 (6) Didner & Gerge Aktiefond 7 060 960 558 2,6%
5 (4) Robur Aktiefond Pension 7 032 194 890 2,6%
6 (9) SPP Generation 60-tal 5 072 854 562 1,9%
7 (8) SPP Generation 50-tal 4 675 274 882 1,7%
8 (75) HQ Rysslandsfond 4 098 189 396 1,5%
9 (2) Robur Contura 3 929 719 442 1,5%
10 (11) AMF Pensions Balansfond 3 549 845 638 1,3%
UK Visit Feb 2006 18
VALSITUATIONEN "I have enough knowledge to manage my premium pension"(18-62 years old)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2005
2004
2003
(5) Fully agree
(4)
(3)
Dont know
(2)
(1) Fully disagree
UK Visit Feb 2006 19
PERFORMANCE
UK Visit Feb 2006 20
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
00
-12
-13
01
-02
-28
01
-05
-31
01
-08
-31
01
-11
-30
02
-02
-28
02
-05
-31
02
-08
-31
02
-11
-30
03
-02
-28
03
-05
-31
03
-08
-31
03
-11
-30
04
-02
-29
04
-05
-31
04
-08
-31
04
-11
-30
05
-02
-28
05
-05
-31
05
-08
-31
05
-11
-30
05
-07
-31
05
-10
-31
06
-01
-31
06
-04
-30
06
-07
-31
06
-10
-31
%
Premiepensions-systemet
Inkomstindex
Performance since 1995
UK Visit Feb 2006 21
Asset Allocation
Svenska aktier38,3%
Utländska aktier52,6%
Svenska räntor7,0%
Utländska räntor2,2% (2,4%)
(6,6%)
(53,1%)
(37,9%)
UK Visit Feb 2006 22
Dispersion
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Less than 0%
0 - 2%
2 - 4 %
4 - 6 %
6 - 8 %
8 - 10 %
More than 10%
Share of total num ber of individuals
Pass ive Active
UK Visit Feb 2006 23
ACTIVE RETURN BY INDIVIDUALS
-0,23% -0,40%
2,61%
0,11%
2,50%
-0,18%
1,63%
-0,62%
-2,79%
-0,60%
2,78%
0,70%
-3,0%
-2,0%
-1,0%
0,0%
1,0%
2,0%
3,0%
Inklusive Premiesparfonden Exklusive Premiesparfonden
200120022003200420052006