Pension fund executives have welcomed the indefinite postponement of proposed reforms to Sweden’s AP funds, following a failure to reach political agreement over changes.
Proposals had been made, and referred for consideration in June, to merge certain pension funds and close others completely.
“Six months later, despite a great willingness from many of the parties and the government to reach a compromise, there is no longer consensus for the reforms,” said Per Bolund, minister for financial markets and consumer affairs, deputy minister for finance, in a statement provided by a spokeswoman. “At this time there are no plans for further negotiations within the pension group with regards to the reform of the AP funds.”
Executives at Sweden’s AP funds welcomed the decision. “I think this is a victory for the AP funds — this proposal was not a good one,” said Kerstin Hessius, CEO at the 304.4 billion Swedish kronor ($34.8 billion) AP3, Stockholm, in a telephone interview. “It was a compromise, of a compromise, of a compromise. As people who are running an AP fund, we really didn’t understand how this was going to make the system better. We have also had very strong support from the stakeholders because they think the current system is working well.”
Mats Andersson, CEO at the 310 billion Swedish kronor AP4, Stockholm, said in a telephone interview the decision is a “great relief — the proposal could have been a disaster. It would have given a system that is more shortsighted; we would have more passive mandates, less opportunity to be long-term investors, and engaged owners of equities and assets.”
Johan Magnusson, managing director of AP1, Stockholm, said in a statement provided by a spokesman that there had been a “great risk for short-term political control of the AP funds” had reforms been implemented. The fund has 296 billion Swedish kronor in assets.
However, executives would have welcomed changes related to the flexibility of investment rules.
Funds are permitted to invest only up to 5% in unlisted assets; and must have at least 30% allocated to bonds, which Mr. Andersson said at this point in the cycle “is hindering us from making more money.”
A spokesman for the 23.6 billion Swedish kronor AP6, Gothenburg, said in an e-mail: “AP6 still thinks that the proposal regarding investment in (private equity)/unlisted companies would have been the best solution for the AP system and the Swedish pensioners.”
But executives acknowledged that in its absence, the scrapping of reform proposals is enough. “It is better that we continue with the current rules than to implement a bad proposal. Now we have the opportunity to devote ourselves to our main task, to create high returns for current and future retirees,” Mr. Magnusson said.