Swedish premium pension savers who remained in the state pre-selection option AP7 Såfa received better returns on average in 2022 than those who made their own fund choices, according to a Swedish Pensions Agency (SPA) report.

It noted that while pre-select savers experienced better returns on average, almost all pension savers in the premium pension system saw a negative value development in 2022.

Furthermore, the range of returns was wider amongst those who made their own fund selection, with some having higher returns than pre-select savers.

Nearly two-thirds (60.4 per cent) of premium pension savers in Swedish remained in the default AP7 Såfa, while 39.6 per cent made their own premium pension fund selection.

On average since its inception, the premium pension has achieved annual returns of 7.4 per cent, compared to 3.3 per cent for the income pension.

However, in 2022, the average value development for those in the premium pension system was -10.4 per cent.

Those in the pre-select AP7 Såfa got returns of -9.1 per cent, while those who made their own fund selection had average returns of -11.7 per cent.

Meanwhile, premium pension retirees saw an average fund development of -7.7 per cent.

“The pension is often earned over a long period of time, 40-45 years or even longer,” commented SPA analyst and report author, Dan Frankkila.

“The future size of the pension depends to some extent on the value change in the funds within the premium pension.

“For example, a person who deposits the same amount every year for 40 years with an annual growth in value of 2 per cent gets a whopping 54 per cent larger final balance than a saver without growth in value.”

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