​Sweden slims pensions buffer system to three AP funds from five

Sweden is revamping its 25-year-old system of having five separate buffer funds backing its state pension system, with the cross-party pensions group announcing this morning that it has backed a proposal to cut their number to just three funds.

According to the announcement from the Finance Ministry, of the ideas put forward by the government’s special investigator Tord Gransbo last June, the pensions group supports the ideas of incorporating the Gothenburg-based private equity specialist fund AP6 into AP2, also located in the city, and regarding the three Stockholm-based funds, of liquidating AP1 and transferring its assets equally to AP3 and AP4.

Niklas Wykman, Swedish minister for financial markets, said: “We are protecting taxpayers’ money, which is why we are tightening the requirements for boards and merging some funds.

“Today, there are no fewer than five buffer funds, despite the obvious economies of scale,” he said.

Wykman said the reform lowered costs, provided better control over the funds’ operations, and benefitted everyone who worked and paid into the income pension system.

Anna Tenje, minister for the elderly and social insurance, who chairs the pension group, said: “Today’s announcement means that the costs for AP fund management will decrease and the return to pension savers and pensioners can instead increase.”

The Finance Ministry said the pensions group – which consists of representatives from all eight parliamentary parties – supported the incorporation of AP6 into AP2, which would remain in Gothenburg.

“To provide scope for utilising the expertise acquired in AP6, AP2 will be given increased opportunities to invest in unlisted assets until 2036,” the ministry said, listing proposals backed by the group.

“The current three buffer funds in Stockholm will become two. The consolidation will be done by distributing the assets in one of the funds equally between the two remaining funds, so that they become of equal size,” the announcement went on.

“To provide scope for utilising the expertise acquired in AP6, AP2 will be given increased opportunities to invest in unlisted assets until 2036”

The parliamentary parties have also agreed that the scope to invest in Swedish listed companies will be increased for the two remaining funds in Stockholm to a maximum of 3% of the value of all shares in Swedish listed firms from 2%.

“The current provision that buffer funds may not own more than 10% of the votes in a Swedish listed company remains,” the parties decided.

The agreement also includes a tightening of the statutory competence requirement for boards of the funds, according to the announcement.

The government said it would propose the appointment of two special investigators to assist the funds concerned with the implementation of the reorganisation – one for Stockholm and one for Gothenburg.

“With regard to the consolidation in Stockholm, it is proposed that the assets in AP1 be transferred in equal parts to AP3 and AP4,” the ministry said.

“It is also proposed, in line with the investigator’s recommendations, that the government may decide that certain assets shall be managed in a special order, with the aim of limiting costs,” it said.

The changes are aimed to be implemented by 1 January 2026, it said.

The idea of reducing the number of buffer funds to three was a key part of the reform proposal in 2012 from the buffer fund inquiry, chaired by pensions expert Mats Langensjö. That reform plan was abandoned three years later, however.

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