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Exploring the Swedish Premium Pension System: Insights from the 2007 Tallinn Workshop

This workshop, held on September 6-7, 2007, in Tallinn, focuses on the Swedish Premium Pension System, illustrating the transition from defined benefit (DB) plans to defined contribution (DC) models. Key topics include fund performance, annuities, cost structures, and individual choice mechanisms within the system. With approximately 5.7 million pension savers and access to 767 funds, the workshop sheds light on the effectiveness of a competitive fund market and the importance of costs in pension management. This event underscores the role of private pension provisions in enhancing retirement security in Sweden.

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Exploring the Swedish Premium Pension System: Insights from the 2007 Tallinn Workshop

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  1. THE SWEDEISH PREMIUM PENSION SYSTEM Workshop on Private Pension Provisions,Tallin 6-7 September 2007 Daniel Barr, Chief Economist Premium Pension Authority

  2. DISPOSITION • From DB-land to DC-country • Activity • Performance • Annuities • Costs Work shop on private pension

  3. FROM DB TO DC Work shop on private pension

  4. Members choice THE SWEDISH PENSION SYSTEM First Pillar Second Pillar Third Pillar Occupational schemes (90% coverage, to a larger extent DC) Tax efficient individual pensions (incl. mutual funds, unit linked) Income Pension (PAYG) Premium Pension(DC, funded) GuaranteedPension(filling up) Work shop on private pension

  5. PREMIUM PENSION • Individuals can choose maximum 5 mutual funds • Default fund invest on behalf of passive individuals Work shop on private pension

  6. ”The Clearinghouse Model” Fund Fund Fund manager Fund Fund PPM Fund Fund manager Fund Fund Approx. 5,7 million pension savers Fund Fund manager Fund Work shop on private pension

  7. 767 funds 84 fund companies OPEN ARCHITECTURE • Meet the requirements in the UCITS-directive (85/611/EEG) Work shop on private pension

  8. ACTIVITY Work shop on private pension

  9. NEW COMERS Proportion of new members that made an active choice * Delayd information campaign Work shop on private pension

  10. Active members share stabilise Work shop on private pension

  11. FUND SWITCHES Work shop on private pension

  12. Top ten funds 2006 (2000) Work shop on private pension

  13. VALSITUATIONEN Work shop on private pension

  14. PERFORMANCE Work shop on private pension

  15. Asset Allocation Work shop on private pension

  16. Performance since 1995 Work shop on private pension

  17. Dispersion Work shop on private pension

  18. ANNUITIES Work shop on private pension

  19. PPM´s insurance products • at retirement • not before age 61 • lifelong annuity, or • joint life lifelong annuity • chose pension level: 25%,50%,75%,100% Work shop on private pension

  20. PPM´s insurance products • both “variable annuity” and “with profit annuities” • “Variable annuity” alternative: • pension recalculated each year • fund value • expected remaining life time Work shop on private pension

  21. PPM´s insurance products • With profit annuities • guaranteed yearly amounts • 0 % nominal • possible future bonus Work shop on private pension

  22. COST Work shop on private pension

  23. IMPORTANCE OF COSTS Work shop on private pension

  24. COSTS • PPM’s fee • Covers collection of contributions, payments, record keeping, trading, information etc. • Asset management fees • Drawn by fund managers • PPM requires discount to compensate for distribution costs Work shop on private pension

  25. COST OVER TIME Work shop on private pension

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