1. THE SWEDEISH PREMIUM PENSION SYSTEM Workshop on Private Pension Provisions, Tallin 6-7 September 2007 Daniel Barr, Chief Economist Premium Pension Authority

2. Work shop on private pension 2 DISPOSITION From DB-land to DC-country Activity Performance Annuities Costs

3. Work shop on private pension 3 FROM DB TO DC

4. Work shop on private pension 4 THE SWEDISH PENSION SYSTEM First PillarSecond PillarThird Pillar Tax efficient individual pensions (incl. mutual funds, unit linked) Occupational schemes (90% coverage, to a larger extent DC) Income Pension (PAYG) Premium Pension (DC, funded) Guaranteed Pension (filling up) Members choice

5. Work shop on private pension 5 PREMIUM PENSION Individuals can choose maximum 5 mutual funds Default fund invest on behalf of passive individuals

6. Work shop on private pension 6 ”The Clearinghouse Model” Fund Fund manager PPM Approx. 5,7 million pension savers

7. Work shop on private pension 7 OPEN ARCHITECTURE Meet the requirements in the UCITS- directive (85/611/EEG) 767 funds 84 fund companies

8. Work shop on private pension 8 ACTIVITY

9. Work shop on private pension 9 NEW COMERS Proportion of new members that made an active choice Year20002001200220032004200520062007* Active67,0%27,6 %14,1%8,3%9,4 %8,0%7,4 %1,7% * Delayd information campaign

10. Work shop on private pension 10 Active members share stabilise

11. Work shop on private pension 11 FUND SWITCHES

12. Work shop on private pension 12 Top ten funds 2006 (2000) FundMarket ValueMarket Share 1 (1)Premiesparfonden (Default)78 857 410 99529,5% 2 (5)AMF Pensions Aktiefond - Sverige9 210 050 1303,4% 3 (3)AMF Pensions Aktiefond - Världen7 905 309 7783,0% 4 (6)Didner & Gerge Aktiefond7 060 960 5582,6% 5 (4)Robur Aktiefond Pension7 032 194 8902,6% 6 (9)SPP Generation 60-tal5 072 854 5621,9% 7 (8)SPP Generation 50-tal4 675 274 8821,7% 8 (75)HQ Rysslandsfond4 098 189 3961,5% 9 (2)Robur Contura3 929 719 4421,5% 10 (11)AMF Pensions Balansfond3 549 845 6381,3%

13. Work shop on private pension 13 VALSITUATIONEN

14. Work shop on private pension 14 PERFORMANCE

15. Work shop on private pension 15 Asset Allocation

16. Work shop on private pension 16 Performance since 1995

17. Work shop on private pension 17 Dispersion

18. Work shop on private pension 18 ANNUITIES

19. Work shop on private pension 19 PPM´s insurance products at retirement  not before age 61  lifelong annuity, or  joint life lifelong annuity  chose pension level: 25%,50%,75%,100%

20. Work shop on private pension 20 both “variable annuity” and “with profit annuities” “Variable annuity” alternative: –pension recalculated each year fund value expected remaining life time PPM´s insurance products

21. Work shop on private pension 21 PPM´s insurance products With profit annuities – guaranteed yearly amounts – 0 % nominal – possible future bonus

22. Work shop on private pension 22 COST

23. Work shop on private pension 23 IMPORTANCE OF COSTS CostReduction of pension 0,05 %2 % 0,15 %5 % 0,25 %8 % 0,50 %15 % 0,75 %22 % 1,00 %28 % 1,50 %39 %

24. Work shop on private pension 24 COSTS PPM’s fee –Covers collection of contributions, payments, record keeping, trading, information etc. Asset management fees –Drawn by fund managers –PPM requires discount to compensate for distribution costs

25. Work shop on private pension 25 COST OVER TIME