Sweden's Pension Group Weighs Scheme Consolidation

Sweden has initiated a review of the country's state pension funds, which collectively manage more than €100 billion ($141.8 billion).

(June 23, 2011) — Sweden’s €100 billion ($141.8 billion) state pension funds may merge following government review.

In an effort to ensure that Sweden’s schemes can best contribute to current and future pensions, the country’s governmental pensions group will investigate whether Sweden needs all its five “buffer” funds.

The ministry of finance said lessons learned during the financial crisis justified a revision of the framework, which was introduced more than a decade ago.

The review will investigate the overall structure of the AP funds — which consist of AP1 through AP4, and AP6. (There is no AP5.) AP3 — which has been championing heighten investment flexibility — welcomed the government’s review, Financial News reported. The government said it would start its review after the summer.

While the Swedish government said it may merge some of its five funds, it revealed that it would keep at least three of them as a minimum. “For cost reasons, there may be reasons to reduce the number of funds,” it said in a statement. “The risk of concentration of power and the need for risk diversification argues for having several funds.”

Last year, an annual evaluation of all AP funds revealed that overall performance was unsatisfactory.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742