Fund saving increasingly important for tomorrow’s pensioners

One in every two new-borns in Sweden today can expect to experience their 100th birthday. When an increasing percentage of the population is made up of the elderly, bigger demands are being made on the pension system. At the same time, the need for personal involvement and complementary pension savings is growing.

Fund saving increasingly important for tomorrow’s pensioners

When an increasing percentage of the population is made up of the elderly, bigger demands are being made on the pension system. At the same time, the need for personal involvement and complementary pension savings is growing.

Funds are a particularly suitable savings format for long-term saving in premium-based pension systems in that investment orientation and risk level can easily be adapted in line with individual preferences and requirements. Funds offer an opportunity to invest in the capital market and hence the chance to share in the equity market’s risk premium that contributes to a higher long-term growth in an individual’s pension capital. Fund-based saving is also a good option if a saver wishes to shift their pension assets.

Funds across the entire pension system

Funds across the entire pension system

Funds are now offered as an alternative in every part of the pension system – in the national retirement pension via the premium pension, in occupational pensions and in private pension saving.

Fund-based saving is increasingly important in terms of financing our future pensions. The majority of new saving in funds has, by far, entailed pension- and insurance-related saving since the year 2000, and pension savings’ share of total net fund assets has consequently increased from approximately one quarter in 2000 to over half by 2015.

Pension savings' share of net fund assets in Sweden

7 out of 10Premium pension a valuable opportunity

  • The return in the premium pension system since its launch and up until the end of 2015 has, multiple financial crises notwithstanding, outperformed the income pension, growing by an average of 6.4 % compared to 2.8 % per annum.
  • By 31 December 2015, over 98 % of pension savers had seen a positive return in their premium pension accounts.
  • Savers are interested. Over half of all savers have chosen their own funds and those who have account for over 70 % of the assets under management.
  • Seven out of every ten people aged between 18 and 42 appreciate the option of making their own premium pension choices.
  • The average fund fee in the premium pension system is 0.28 %, after the equivalent of a two thirds discount on the gross fee.

There is still a need to encourage private pension saving

Need for retirement savingThe tax deduction entitlement for private pension saving was abolished at the end of 2015. The Swedish Investment Fund Association believes that there is still a substantial need to encourage private pension saving and would, therefore, prefer to see the tax deduction entitlement replaced with an option of saving for one’s pension that can be withdrawn, tax-free, when the saver reaches retirement age. This could, for example, be achieved by the creation of individual savings accounts for pension saving which would be “locked” until the saver reaches retirement age.

Report: Facts about the premium pension - updated 2015

Facts about the Swedish premium pension. The report shows both that the return on investments within the premium pension system has been very competitive and that the system is a cost-effective one. It is also clear that Swedes – and young Swedes in particular – appreciate the opportunity to make their own fund choices when it comes to their premium pension. And that many people are exploiting this opportunity. 
Download the report here. 

"Min Pension" - important tool for an overall picture

“Min Pension” (My Pension) is a partnership between the pension companies and the state and covers the lion’s share of pension assets. Everyone who has earned a pension in Sweden via the national retirement pension and occupational pension can, via the Minpension.se website gain an overall picture of their pension savings.

Further reading:

More facts: The evolution of the Swedish fund market

More facts: The importance of funds for individuals, companies and society

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