In the new offices of the Premie-PensionsMyndigheten (PPM), the Premium Pensions Authority, in the centre of Stockholm, they have been unpacking in preparation for the helter-skelter drive to be up and fully running by next autumn. After the long wait for the new funded element within the great Swedish pension reform, finally approved in June, this seems almost indecent haste.

So it is not surprising to find PPM's director general Hans Jacobson admitting: We are under great pressure to get this system together in under one year." He and his team certainly have their work cut out.

"This is one huge computer operation. People tell me there has never been anything like it." On day one, Skr34bn ($4.2bn) in invested contributions has to be allocated to 4.1m individual accounts and then to their choice of investment managers. "It has to be perfect from the outset."

Under the new state pension system, 2.5% of the 18.5% contribution of taxable pay goes to PPM, a new state organisation, which allocates this among investment funds chosen by the individual; the remaining 16% is on a pay-as-you-go basis. "While 2.5 is only 14% of 18.5, it could perhaps provide 33% of final pension.

"People will be able to spread their contribution among five to 10 managers at any one time. My hope is that we will start with five as this will minimise the chances of people making mistakes when filling in their forms. But they will be able to change their funds as often as they want without a fee." The logic here is that if the public is forced to put its money into an investment fund, the least they need is the right to change. For those who do not choose, contributions will go to a new savings fund run by a seventh AP fund board.

"The system is open as far as fund managers are concerned," says Jacobson. "Any fund can participate provided it is a Ucits fund." It is just a matter of registering with PPM. "So we could have any number of funds participating and we are seeing an increasing number of foreign managers interested."

PPM will be responsible for running a guaranteed fund for those who want to be sure their capital is secure and earning a guaranteed rate of return in the run-up to retirement.

Pensions can be drawn at any point from age 61, wholly or in part and can be stopped and restarted. And a spouse's pension may be taken for a reduction of about 15% in benefit where ages are similar.

But vestiges of social security remain in that on death nothing is payable and the value of the investments is distributed to the general pension fund. "The social security people could not accept that you could inherit this money."

In spring the social security will inform each contributor as to their proportion of the existing Skr34bn, which has been built up with the 2% of annual contributions already put into the funded element for a number of years and held at the Nation-al Debt Office, waiting to be allocated through the PPM to the chosen managers next autumn, along with current 2.5% contribution.

"PPM will act as the interface between the individuals and the managers, who will just have one account with the authority," ex-plains Jacobson. "This was not just a question of efficiency, but also of integrity, as it could be awkward for some people to have their identity known where they are investing."

The system is not without its costs and they are expected to be around Skr181 per person, initially amounting to a total of Skr 745m, but as the system had to be designed to cope with future flows expected to build up to Skr700bn by 2222 and perhaps Skr1trn at peak, the decision was to spread the costs over 20 years. The average fee per person is expected to be around Skr20 in 1999, but requiring the PPM borrow to around Skr645m to meet the shortfall. The fee of three basis points will be deducted from the capital.

PPM is also controlling the fees managers can charge in their contracts. "The legislation says we should keep fees down, but not distort competition." Jacobson is well aware that if managers' fees are just 0.2% for equity funds, there will only be a handful of players who can work at these levels, such as the big Swedish groups. "We have to find a way of encouraging the smaller managers, including foreigners, so fees will have to be volume-related, high for smaller amounts and de-creasing with higher amounts." It is expected the number of funds will run into hundreds.

The system is going to be as streamlined as possible. PPM will have no public offices and people will be asked to communicate via the internet or touch-tone phones and all forms will be barcoded for the individual.

One of Jacobson's main fears is that people will think that PPM does some sort of tests or vetting on the managers. "We do not approve funds, that is done by their supervisory authority under the Ucits system." He is hopeful that some general advice can be given, such as about diversification, the track record of the Swedish equity market and so on. "We have to give some support for the decision." Fennell Betson"

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