Swedish pension fund AP7, which runs the default option in the country’s defined contribution premium pension system, said that last year, it made the highest return on its giant equity fund since its default product was launched 10 years ago.

The equity fund – one of the two building blocks behind the default premium pension product Såfa – generated a 31.5% return in 2021, the state-run pension fund announced.

In 2020, AP7’s equity fund produced a 4.7% return in 2020, which was around half the gain made by the private funds offered on the first-pillar system’s funds marketplace platform.

The government agency also said in the announcement on Friday that fees on the equity fund had come down to 0.05% at the beginning of this month from 0.075% before.

Richard Gröttheim, chief executive officer of AP7, said: “Low costs are an important parameter for long-term pension savings. As a default in the premium pension, we have a responsibility to continuously reduce the fee when there is room for it.”

The equity fund made up SEK783.4bn (€76bn) of AP7’s total assets at the end of June 2021, with the other building block – the bond fund – accounting for the rest of its total assets of SEK849bn.

AP7 said: “With an increase of 31.5%, 2021 was one of the best years since AP7 Såfa was created over 10 years ago.”

Since it was launched in May 2010, Såfa had returned an average of 15.0% annually, the pension fund said.

AP7 said this year’s fee reduction for the equity fund meant an annual saving of more than SEK190m for the five million savers in the fund, and that the last time the fee had been cut was January 2021.

The fee for the bond fund was unchanged at 0.04%, AP7 said.

“The fact that the equity fund’s fee is increasingly approaching the low level of the fixed income fund makes the value that the equity fund’s economies of scale give savers quite clear,” said Gröttheim.

Last August, when reporting half-year results, AP7 said it had increased the diversification in its equities portfolio between January and June 2021, adding more risk premia and private equity investments.

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