UK Visit Feb 2006 1 THE SWEDISH PREMIUM PENSION SYSTEM Daniel Barr, Chief Economist.

UK Visit Feb 2006 1

THE SWEDISH PREMIUM PENSION SYSTEM

Daniel Barr,

Chief Economist

UK Visit Feb 2006 2

DISPOSITION• From DB-land to DC-country

• Activity

• Performance

UK Visit Feb 2006 3

FROM DB TO DC

UK Visit Feb 2006 4

FORMER STRUCTUREFirst Pillar Second Pillar Third Pillar

Occupational schemes (DB, 90% coverage)

Tax efficient individual pensions (incl. mutual funds, unit linked)

AFP (flat rate pension)

ATP DB PAYG

(related to 15 best income years)

UK Visit Feb 2006 5

REFORMED NATIONAL PENSION SYSTEM

Premium pension (DC,funded) 2,5%

Income pension (NDC, PAYG) 16 %

Guaranteed pension (filling up)

UK Visit Feb 2006 6

INCOME PENSION• PAYG ”Notional DC”• Contribution 16 percent of capped income.• Paid into individual notional accounts and indexed

to average earnings

UK Visit Feb 2006 7

THE SWEDISH PENSION SYSTEM

First Pillar Second Pillar Third Pillar

Tax efficient individual pensions (incl. mutual funds, unit linked)

Occupational schemes (90% coverage, to a larger extent DC)

Income Pension (PAYG)

Premium Pension(DC, funded)

GuaranteedPension(filling up) Members

choice

UK Visit Feb 2006 8

PREMIUM PENSION

• Individuals can choose maximum 5 mutual funds

• Default fund invest on behalf of passive individuals

UK Visit Feb 2006 9

”The Clearinghouse Model”Fund

Fund

Fund

Fund

Fund

Fund

Fund

Fund

Fund

Fund manager

Fund manager

Fund manager

PPM

Approx. 5,7 million pension savers

UK Visit Feb 2006 10

OPEN ARCHITECTURE

• Meet the requirements in the UCITS-directive (85/611/EEG)

780 funds 83 fund companies

UK Visit Feb 2006 11

ACTIVITY

UK Visit Feb 2006 12

NEW COMERS

Proportion of new members that made an active choice

Year 2000 2001 2002 2003 2004 2005 2006

Active 67,0% 27,6 % 14,1% 8,3% 9,4 % 8,0% 7,4 %

UK Visit Feb 2006 13

SAME TREND IN OCCUPATIONAL SCHEMES

60%

33% 33%

24% 23% 22%

17%

31%29,7%

27,70%

23,90%

17,60%

14,10%

8,40% 9,40%

64%

36%34%

61,5%

65,10%

0%

10%

20%

30%

40%

50%

60%

70%

1998 1999 2000 2001 2002 2003 2004

SAF/LO

PFA-98

Premiepension

PA03

UK Visit Feb 2006 14

Active members share increases

50%

55%

60%

65%

70%

75%

2000 2001 2002 2003 2004 2005 2006

Individuals Capital

UK Visit Feb 2006 15

ACTIVITY IN 401k-PLANS

UK Visit Feb 2006 16

FUND SWITCHES

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

1 800 000

2 000 000

2000 2001 2002 2003 2004 2005 2006

UK Visit Feb 2006 17

Top ten funds 2006 (2000)

Fund Market Value Market Share

1 (1) Premiesparfonden (Default) 78 857 410 995 29,5%

2 (5) AMF Pensions Aktiefond - Sverige 9 210 050 130 3,4%

3 (3) AMF Pensions Aktiefond - Världen 7 905 309 778 3,0%

4 (6) Didner & Gerge Aktiefond 7 060 960 558 2,6%

5 (4) Robur Aktiefond Pension 7 032 194 890 2,6%

6 (9) SPP Generation 60-tal 5 072 854 562 1,9%

7 (8) SPP Generation 50-tal 4 675 274 882 1,7%

8 (75) HQ Rysslandsfond 4 098 189 396 1,5%

9 (2) Robur Contura 3 929 719 442 1,5%

10 (11) AMF Pensions Balansfond 3 549 845 638 1,3%

UK Visit Feb 2006 18

VALSITUATIONEN "I have enough knowledge to manage my premium pension"(18-62 years old)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2005

2004

2003

(5) Fully agree

(4)

(3)

Dont know

(2)

(1) Fully disagree

UK Visit Feb 2006 19

PERFORMANCE

UK Visit Feb 2006 20

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

00

-12

-13

01

-02

-28

01

-05

-31

01

-08

-31

01

-11

-30

02

-02

-28

02

-05

-31

02

-08

-31

02

-11

-30

03

-02

-28

03

-05

-31

03

-08

-31

03

-11

-30

04

-02

-29

04

-05

-31

04

-08

-31

04

-11

-30

05

-02

-28

05

-05

-31

05

-08

-31

05

-11

-30

05

-07

-31

05

-10

-31

06

-01

-31

06

-04

-30

06

-07

-31

06

-10

-31

%

Premiepensions-systemet

Inkomstindex

Performance since 1995

UK Visit Feb 2006 21

Asset Allocation

Svenska aktier38,3%

Utländska aktier52,6%

Svenska räntor7,0%

Utländska räntor2,2% (2,4%)

(6,6%)

(53,1%)

(37,9%)

UK Visit Feb 2006 22

Dispersion

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Less than 0%

0 - 2%

2 - 4 %

4 - 6 %

6 - 8 %

8 - 10 %

More than 10%

Share of total num ber of individuals

Pass ive Active

UK Visit Feb 2006 23

ACTIVE RETURN BY INDIVIDUALS

-0,23% -0,40%

2,61%

0,11%

2,50%

-0,18%

1,63%

-0,62%

-2,79%

-0,60%

2,78%

0,70%

-3,0%

-2,0%

-1,0%

0,0%

1,0%

2,0%

3,0%

Inklusive Premiesparfonden Exklusive Premiesparfonden

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