The pension cabals are in session throughout corporate Sweden. In pale- hued, pine-furnished, smoke-free offices, the question of whether to set up pension foundations or not is exercising the groups of human resource, finance and legal executives as they contemplate the funding or book reserve question.

The issue is something of a big company affair, as the FPG, which insures supplementary pension book reserves against bankruptcy, points out. The 10 largest companies account for 40% of its total exposure of Skr91bn ($11.2bn) in 1997. This figure was a good guide in the past to the size of the potential market for funding. But as employers still have to insure against bankruptcy even if they set up fully funded foundations (they do pay a reduced premium), this figure will refer to more funded schemes each year.

Multinational gas group AGA, which has around 10% of its 11,000 worldwide workforce in Sweden, has been meeting weekly to consider the issue of transferring funds to meet its Skr370m of book reserved white collar ITP pension liabilities, says Jan-Erik Danielsson, manager pensions and international assignments. The company's board has agreed in principle and the working group is looking at the implications from a finance, tax and personnel viewpoint. We are investigating the way forward for us." He expects the decision this month.

He says: "The main advantage we see is that it should lower our pension costs. The market turbulence is not likely to affect our decision as it is a strategic one." Nor are the long discussed changes to the ITP likely to affect the decision, he adds. Other big groups who were actively examining pension funds have put the matter on hold until the ITP discussions are finished, which could be this month.

Ericsson, Sweden's biggest private sector employer, is one that has postponed further consideration of the foundation establishment until the ITP scheme's future is clarified, ac-cording to group benefits manager Hans Eklund. It is involved in the changes to the AMF blue collar supplementary scheme, affecting some 13,000 of the workforce, who have decisions to make about the choice of pension provider. "What we are doing is providing information on our in-tranet insurance website about the changes." At local plant level, the personnel manager will decide as to how far they work with the union and provide access. Eklund believes that when the new PPM system comes on stream the group will be actively involved in providing information, perhaps with connections to the PPM website.

"Earlier this year we started a project to look at a pension foundation and came to the conclusion it was a good idea." But the ITP discussions, which would impact on 32,000 of the group employees, are likely to lead to a defined contribution arrangement of some sort. The question is what will happen to the ITP monopoly carrier SPP, he says. "With the overfunding of SPP, there is a thought that SPP might become a gigantic pension fund,with different sections for different companies and that could be an interesting alternative." As it stands, Ericsson has book reserved its liabilities and currently just uses SPP for some of the risk benefits.

For the many employers who have used SPP to insure their ITP liabilities, the huge surpluses the 50/50 employer-union owned insurer of Skr77bn must have left them feeling that they have been well and truly overcharged by the system and they may well be looking at alternatives.

Ericsson is doing this for those higher paid employees who can opt out of the ITP system. As a result of a change in the tax system, other providers can be used effectively. With chemical group Astra it is looking to run a competitive scheme (see page xx). Other employers will be watching this development closely.

But the expected shift within ITP to DC will have its impact on corporate plans too, whatever the future form of SPP. As one pension foundation says: "If the ITP goes DC we would not be able to allocate anything more to book reserves on the balance sheet, so it will take liquidity away from the group.""