SWEDEN - The Swedish national pension system, or inkomstpension, which uses the AP funds as buffers to cover pension liabilities, said it suffered a fall of SEK261bn (€23.5bn) in assets in 2008.

Figures from the Orange Report, the annual report of the pension system, showed the total assets in the inkomstpension increased from SEK7.01trn to SEK7.18trn (€640bn), however the pension liabilities also rose from SEK6.996trn to SEK7.43trn.

The report showed the national system, which receives 16% of the 18.5% of annual compulsory pension contribution and relies on the AP funds to build up assets to cover pension benefits, moved from a surplus of SEK18bn in 2007 to a deficit of SEK243bn by the end of 2008.

Data published by the Swedish Social Insurance Agency (SSIA) on the inkomstpension follows earlier results from the Premium Pension Authority (PPM) - responsible for the other earnings-related part of the Swedish pension system the premium pension - which reported a loss in the value of holdings of 34.5% to around SEK230bn. (See earlier IPE article: Swedish default fund loses over a third)

The 2008 annual report for the pension system also showed the balance ratio of the system - the assets divided by the liabilities - produced a figure of less than one, 0.96762, which has triggered the balancing mechanism for 2010.

When the figure falls below 1.000 the indexation of pension balances and pension benefits is reduced and is calculated on the basis of the ‘balance index’ rather than the income index, until the balance ratio is restored to 1.000 and balancing can be deactivated.

The SSIA pointed out in its report that the main driver behind the deficit in the inkomstpension is a decrease in the value of the buffer funds - AP1-6 - as it reported a fall in the value of the five funds of SEK191bn, or -21.3%.

However it added the deficit had also increased at a faster rate than the inflow of contributions to the system, because of a shorter turnover time - the period between a krona being invested and when it is paid out.

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