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Summary
The Swedish Social Insurance Inspectorate (Inspektionen för
socialförsäkringen, ISF) is an independent supervisory agency for the
Swedish social insurance system. Its objectives are to strengthen
compliance with legislation and other statutes, and to improve the
efficiency of the social insurance system through system supervision
and efficiency analysis and evaluation.
ISF’s work is mainly conducted on a project basis and is
commissioned by the Government or initiated by the Agency. This
report has been initiated by the Agency.
Background
During the last decade, individuals in Sweden have become more
involved in investment decisions when it comes to saving for their
own retirement. A defined contribution plan called the Premium
Pension System (PPS), which is a part of the mandatory Swedish
public pension scheme, covers all employees since July 2000, with
yearly contributions equal to 2.5 per cent of income. Within the
system, future pensioners create their own portfolio with a maximum
of five funds containing equities, bonds, or both. If the individual is
inactive at entry and no fund choice is made, the savings are invested
in a specific default fund, managed by the Seventh AP Fund, which is
a state-managed national pension fund. In the PPS, the fund choice
can be made from about 800 different funds. The individuals can
choose funds on a daily basis and without having to pay for any
transaction costs. However, financial planning towards retirement is
complex, since the individual must understand and process
information regarding risk and return and from this predict future
development on the financial markets.
Between 2001 and 2010, an increasing number of savers in the PPS
chose to pay an external financial advisor for their investment choices
in the PPS. These external financial advisors, who make discretionary
decisions regarding their clients’ PPS funds, were responsible for a
