How Sweden became a world leader in fund saving

Funds, as a savings format, are more popular in Sweden than anywhere else worldwide. Eight out of every ten Swedes save in funds, and if mandatory premium pension savings are included, we are all fund savers.

Here are some of the milestones that made Sweden a nation of fund savers. 

The first Swedish funds were launched in the 1950s

Two brothers, Ragnar and Gösta Åhlén, heirs to the mail order firm, Åhlén & Holm and the department store chain, Tempo, launched Sweden’s first funds in 1958. They took their inspiration from the USA, where saving in funds grew sharply in the 1940s.  

In 1968, the total net assets of funds in Sweden was SEK 136 million.  

Funds come under State supervision in the 1970s

There was no State supervision of the first funds launched. An equity fund commission was appointed in 1963 and submitted its report to Parliament in 1969. The commission proposed that the foundations offering funds at that time be replaced by limited companies. Fund management companies would apply for a licence to conduct mutual fund operations and be subject to supervision by the Swedish Financial Supervisory Authority. Sweden’s first Mutual Funds Act was adopted in 1974. The overall attitude towards equity funds was positive, with the Swedish Bank and Stock Exchange Inspection Board writing to the Government as follows in 1960:  

"... efforts to expand share ownership, such as the facilitation of enterprises’ financing, (are) worthy of encouragement.” 

Tax-save funds launched in 1978

Tax saving could take the form of saving either in a savings account or in equity saving funds. The Tax-save funds were only allowed to invest in Swedish equities. Every krona saved was 20% deductible against income tax. The return was also, during the year in which it was saved and for the following five years, tax-free. In 1980, the tax deduction was raised to 30%. 

Between 1979 and 1982, the number of savers increased from 75,000 to 425,000. 

“Allemansspar” public savings programmes bring about a breakthrough for funds 

A public savings programme known as “Allemansspar”, where funds were one savings alternative, was introduced in 1984. The “Allemansfonder” funds were very similar to the Tax-Save funds, but no deduction against income tax was permitted. The returns were, however, completely tax-free. Fund saving became a popular movement in Sweden.  

By 1990, there were 1.7 million “Allemansfonder” accounts. Swedes had the chance to invest in the equities market, and continued to do so, even once the tax subsidies were eliminated in 1997. 

Harmonised EU regulations enable cross-border fund trading 

The EU was keen to promote cross-border trade in funds, and consequently harmonised regulations within Europe. The so-called UCITS rules (Undertakings for Collective Investments in Transferable Securities) were introduced in Sweden in 1991. 

In the 1980s, the only funds available were, in principle, equity funds focusing on the Swedish market, because currency regulations hindered the ownership of foreign shares. Currency regulations were, however, gradually abolished, enabling investments in other countries and resulting in the subsequent development of funds with numerous different geographic and sectoral orientations. 

Fund-based pension saving becomes popular 

When fund-based saving was introduced, the only option was to save directly in funds. New opportunities to invest in funds through so-called unit-linked insurances emerged in the 1990s, offering saving through endowment insurance or pension insurance. Savers were now able to shift their money between different funds without incurring tax on the capital gain. Instead, they paid an annual returns tax based on the value of the holding.  

Individual pension saving, IPS, was introduced in 1994, offering private persons the chance to make deductible investments for private pension saving in funds, equities, or bank accounts, with no insurance-based component. The deductibility of IPS was abolished in 2016. 

The premium pension becomes part of the public pension system 

A new Swedish public pension system was approved in 1994. One of the new features to be introduced would see a component – 2.5% of the salary – going to the premium pension, where savers were given the opportunity to invest their money in funds for themselves. The first premium pension choices were made in 2000.  

All Swedes with an income and who were born since 1938 were now automatically fund savers.  

Investment Savings Accounts introduced

The Investment Savings Account (ISK) was introduced in 2012 in response to a decision by Parliament to stimulate saving in funds and equities. There is no tax on capital gains in ISKs; instead, the saver pays an annual standard rate of tax. Fund savers nowadays mainly choose to save in funds via investment savings accounts. 

Fund savings by category

Studies and surveys of funds and fund saving