Swedish savers who invest their premium pension in an equity fund with a high fee can expect poorer value development and a lower pension compared to those invested in a low fee fund, according to the Swedish Pensions Agency.

A new report from the agency, which has analysed the development of the premium pension fund marketplace, found that there are 475 funds to choose from. The Swedish Pensions Agency has analysed the development of the fund market during the period 2012–2021.

“Funds cost different amounts to save in and the fund fee can make a significant difference to how large the final premium pension will be. In a choice between similar equity funds, the fund with the lowest annual fee is generally preferable,” Swedish Pensions Agency analyst, Jesper Lorentz, said.

For example, savings with the same deposit over a period of 40 years give a premium pension that is 4.5 per cent lower if you save in a fund that charges 0.4 per cent compared to a fund that charges 0.2 per cent, provided the same value development.

The pensions agency’s statistical analysis of the funds on the premium pension fund market shows that there are no signs that equity funds with a higher net fee have generated a higher net value development during the period 2012–2021. On the contrary, more expensive equity funds seem to have performed worse than cheaper equity funds. Fixed income funds, on the other hand, show an opposite relationship between the net fee and the net value development during the same period.

“Those who have a long time left to retire are expected to get the best value development by saving in equity funds. For those who are close to retirement, it may be wise to reduce the risk by investing part of the savings in fixed income funds that provide a lower, but more stable value development,” Lorentz said.

Those who do not make their own fund choice will have their premium pension invested in the state pre-selection alternative AP7 Såfa. It is a global fund portfolio with a low fee and is structured to provide good long-term value development. The risk is adapted to the saver's age.

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