Sweden’s AP pension buffer funds have refuted a finding in an official report that there was a lack of clarity in their administrative costs, insisting they are transparent in reporting returns, risks and costs.

A report released at the end of last month by the Swedish Social Insurance Inspectorate (Inspektionen för socialförsäkringen or ISF) on administrative costs in the country’s pension system found that some of the administrative costs for the AP funds and the premium pension providers – for example, transaction costs and other fees associated with transactions – were difficult to estimate.

In a joint reply to questions from IPE, AP funds 1-4 said: “We are transparent in our reporting concerning returns, risks and costs.”

The four funds said they reported according to the IFRS standard and were transparent regarding expenses, including commission expenses. 

“The information is published in the AP funds reports – for example, in the annual reports and on our websites,” they said.

The funds said they shared the view that transparency and cost efficiency were crucial for any management.

“The AP funds in general have among the lowest cost levels in the industry, even in an international comparison,” they said.

They said the AP funds’ operations and the audit of these activities were partly regulated by law, and that external auditors reviewed their operations and accounts every year.

They were critical of the ISF’s report and methods.

“The ISF has neither been in contact with us regarding its perceived difficulties finding information nor has it had any contact with us to verify its ‘findings’ regarding the AP funds, when writing the report,” the funds said.

They said the report contained a number of misunderstandings and failed to provide a correct presentation of how the AP fund system worked.

AP funds 1-4 also said that, for a fund manager in general, and a global pension fund in particular, determining an appropriate cost level was a complex process. 

“Calculating costs in isolation gives an all too simplistic picture,” they said.

The level of costs should form part of the broad canvas, instead of being seen as the primary criterion of valuation, they said. 

“This means adopting a holistic view, involving an assessment of revenue and risks, as well as costs,” they said.

They said it was cost-efficiency that needed to be put in the spotlight but that this was not presented in the ISF report.

Meanwhile, a spokesman for AP6 – the Swedish pensions buffer fund that invests exclusively in unlisted companies – said all costs regarding the fund’s asset management, among other things, were disclosed in its annual report and easy to follow year from year.

“The owner, the Ministry of Finance, makes an audit of our financial activities each year, which is reported to the Swedish parliament,” he said.

Separately, a spokesman for AP7, the default premium pension provider, said the pension fund was very transparent about its fees, as the current management fee could always be found on its website.

The ISF report referred primarily to the transparency of the buffer funds, he said, which AP7 is not.

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