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THE SWEDEISH PREMIUM PENSION SYSTEM. Workshop on Private Pension Provisions, Tallin 6-7 September 2007 Daniel Barr, Chief Economist Premium Pension Authority. DISPOSITION. From DB-land to DC-country Activity Performance Annuities Costs. FROM DB TO DC. Members choice.
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THE SWEDEISH PREMIUM PENSION SYSTEM Workshop on Private Pension Provisions,Tallin 6-7 September 2007 Daniel Barr, Chief Economist Premium Pension Authority
DISPOSITION • From DB-land to DC-country • Activity • Performance • Annuities • Costs Work shop on private pension
FROM DB TO DC Work shop on private pension
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
PREMIUM PENSION • Individuals can choose maximum 5 mutual funds • Default fund invest on behalf of passive individuals Work shop on private pension
”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
767 funds 84 fund companies OPEN ARCHITECTURE • Meet the requirements in the UCITS-directive (85/611/EEG) Work shop on private pension
ACTIVITY Work shop on private pension
NEW COMERS Proportion of new members that made an active choice * Delayd information campaign Work shop on private pension
Active members share stabilise Work shop on private pension
FUND SWITCHES Work shop on private pension
Top ten funds 2006 (2000) Work shop on private pension
VALSITUATIONEN Work shop on private pension
PERFORMANCE Work shop on private pension
Asset Allocation Work shop on private pension
Performance since 1995 Work shop on private pension
Dispersion Work shop on private pension
ANNUITIES Work shop on private pension
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
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
PPM´s insurance products • With profit annuities • guaranteed yearly amounts • 0 % nominal • possible future bonus Work shop on private pension
COST Work shop on private pension
IMPORTANCE OF COSTS Work shop on private pension
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
COST OVER TIME Work shop on private pension