AP7’s dominance over Sweden’s premium pension system increased last year with new customers and a better-than-average investment return.

The fund – one of Sweden’s national pension funds and the default provider in the country’s premium pension system (PPM) – increased its saver numbers last year to more than half of the total participants in the system.

Its balanced fund offering, Såfa, generated an investment return above the average return produced by private providers in the PPM, returning 14.4% in 2017.

This compared to the 11.3% average return from funds included in the system’s funds marketplace, according to full-year figures released by the Swedish Pensions Agency.

In 2016 Såfa returned 13.9%, compared to the average private sector return of 9.5%.

The agency said: “Like the year before, 2017 was a year which – viewed from a premium pension perspective – goes down in history as one of the most dramatic.”

The year had included everything from scandals and police investigations to a proposed overhaul of the funds marketplace, it said.

The PPM is the funded part of the Swedish state pension where pension savers can make their own investment choices. Contributions can either be put into products from the wide range of private sector investment managers, or invested with state pension fund AP7’s Såfa option, which uses a lifecycle approach.

The majority of savers in the system had their savings with AP7 in 2017, with the SEK400bn (€38.9bn) fund’s share of customers rising to 52% from 48% in 2016.

However, accounts held with AP7 remained much smaller on average than those held with private sector providers. Assets held with AP7 Såfa amounted to 33% of the total fund capital in the premium pension system last year.

The average account balance at AP7 was SEK173,400, while pension savers with their own portfolios with fund marketplace providers had an average of SEK241,200, according to the data.

Bengt Norrby, statistician at the Swedish Pensions Agency, said: “An explanation for the difference in savings is that a large part of the capital inflow to AP7 Såfa comes from young savers, who usually have lower incomes and, consequently, lower pension contributions.”

At the end of 2017, total managed capital in the premium pension system amounted to SEK1.4trn, up from SEK986bn at the end of the previous year.

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