Swedish pension fund AP7 has introduced a new method of regulating its surplus, in collaboration with the Swedish Pensions Agency (SPA).

The collaboration has resulted in a regulatory function that will allow any surpluses to be returned to savers once a year.

AP7 is the default option for savers within the Swedish premium pension system and it’s management is not designed to generate surplus over time.

To avoid surpluses, the pre-selection option AP7 Såfa has previously opted to lower its fees to combat the pension fund’s surplus.

However, it has decided that a level has been reached where fee reduction as a method of managing its surplus was no longer a viable path, as lower fees than the current level would impair the possibility of maintaining a stable and predictable management fee for savers.

Therefore, as the fund’s income is expected to be greater than the costs for longer periods of time in the future, it has developed the surplus allocation method with the SPA.

The first surplus distribution of SEK 458m will take place in May 2024.

For two-thirds of the approximate 4.5 million savers affected, the surplus distribution will mean a payment of up to SEK 100.

For around 1.5 million savers, the amount will be between SEK 100 and SEK 600, while a few hundred will receive higher amounts.

“The regulatory function means that AP7 annually decides on the return of any surplus to the savers,” AP7 stated.

“The amount that is returned is distributed according to the year the surplus can be attributed to and distributed according to the allocation between AP7 Aktiefond and AP7 Räntefond.

“The pension authority then invests the amount proportionally per unit owner in the saver's existing fund selection. In this way, the regulation function provides a fair distribution of the surplus between the savers.”

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