Skandia is calling for the Confederation of Swedish Enterprise to review Sweden’s occupational pensions system amid what it believes is an ‘increasing concentration of capital’ within Alecta.

In an interview with the financial newspaper, Dagens Industri, Skandia CEO, Frans Lindelöw raised his concerns about Alecta. In March this year Alecta lost SEK 20bn following the crisis facing several US banks, which resulted in Sweden’s Financial Supervisory Authority (FSA) launching an investigation. In September, a second investigation was launched by the FSA into Alecta’s investments in Heimstaden Bostad and its then chair, Ingrid Bonde, resigned with immediate effect.

Skandia has argued that Alecta receives the pension premiums from any civil servant that does not actively choose a pension company. It believes that such a concentration of pension capital in Alecta could become a “major risk” for Swedish pension savers.

“I raise a red flag. The reason is the many billions that go to Alecta annually and the fact that the majority of these come from pension savers who did not choose the company themselves. Today, there is no free competition in the Swedish pension market and that should be something that the Confederation of Swedish Enterprise wants to protect,” Lindelöw said.

Over the past 10 years, Alecta’s pension capital has increased from SEK 600bn to over SEK 1200bn. Looking at the next 10 years, Skandia predicts Alecta's capital will amount to approximately SEK 2,500bn.

“It creates a vulnerability and a social risk when a few people control such a large proportion of Swedish pension money. It is bad for pension savers but also for free competition. In the longer term, the arrangement is also a risk for the entire Swedish business community,” Lindelöw argued.

Since 2007, occupational pensions in Sweden for privately employed civil servants have been undergoing a major shift; from defined benefit solutions towards a fully defined contribution system, known as ITP1.

In order to address the problem with capital concentration, Skandia now proposes that the Confederation of Swedish Enterprise reviews the entire structure of the Swedish occupational pensions within ITP1.

“My call to the confederation is to develop a completely new model based on three criteria; it must counteract unhealthy capital concentration, it must be characterised by relevant freedom of choice and sustainable investments. The customers' own choices are what should be in absolute focus,” Lindelöw concluded.

Alecta declined to comment.

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