The Swedish government has confirmed that it will push ahead with plans to reduce the number of AP funds and to improve the competence requirements for AP fund boards.

The Swedish Ministry of Finance previously shared plans to consolidate the three Stockholm-based Swedish pension buffer funds into two, as part of its ongoing efforts to modernise and streamline the overall management of the buffer capital.

Swedish buffer funds AP2 and AP6 came out against the proposal to consolidate the two funds into one fund, with the latter warning it risks a “significant reduction” in unlisted shares in the buffer fund system.

However, the Swedish government has since confirmed that it will bring forward a bill to modernise the AP funds, which will reduce the number of AP funds and to tighten the competency requirements for AP fund boards.

The bill also has backing from the government Pension Group, where all parliamentary parties are represented.

As part of the reforms, the Sixth AP Fund is set to be merged with the Second AP Fund, which will remain in Gothenburg.

Despite previous concerns, AP6 CEO, Katarina Staaf, noted that the Pension Group has heard some of the issues raised by the industry, with the new plans set to give AP2 increased opportunities to invest in unlisted assets until 2036, to provide scope for utilizing expertise acquired in the Sixth AP Fund.

"As the proposal previously stood, there was a risk that the proportion of unlisted shares in the buffer fund system would decrease, and that the Sixth AP Fund's accumulated expertise would not be fully utilized," Staaf explained.

"The Pension Group has supported a proposal in which they want to provide scope for utilizing accumulated expertise in the Sixth AP Fund and in which the merged fund is given increased opportunities to invest in unlisted assets up to and including 2036."

The government's bill also includes plans to make the current three buffer funds in Stockholm into two, by distributing the assets in one of the funds equally between the two remaining funds, so that they become of equal size.

In particular, the government said that it is looking to transfer the assets of the AP1 in equal parts to AP3 and AP4.

The government said that it may decide that certain assets should be managed in a special order, with the aim of limiting costs. The aim is that the changes shall be implemented by 1 January 2026.

According to the Ministry of Finance, two special investigators will be appointed to assist the funds concerned with the implementation of the reorganization, one who will primarily assist the funds in Gothenburg and one in Stockholm.

To maintain the scope to invest in Swedish listed companies, the bill also looks to adjust the provision that states that buffer funds may own a maximum of 2 percent of the value of all shares in Swedish listed companies, raising this to 3 per cent for the two remaining Stockholm funds.

The statutory competence requirement for boards will also be tightened as part of the reforms, with changes to provisions on the maximum number of board members, with the aim of better handling temporary vacancies.

In addition to this, the possibility of using electronic signatures is being introduced in the same way as has been the case for limited companies since 2016, as well as confidentiality in CEO recruitment, similar to what has been the case since 2010 when appointing top managers in other agencies.

Commenting on the reforms, Minister of FInancial Markets, Niklas Wykman, said: "We are protecting taxpayers' money, which is why we are tightening the requirements for boards and merging some funds.

"Today, there are no fewer than five buffer funds, even though there are obvious economies of scale. This lowers costs and provides better control over the funds' operations. It benefits everyone who works and pays into this system."

Adding to this, Pensions Group chairwoman and Minister for the Elderly and Social Insurance, Anna Tenje, said: "We are constantly working to protect the interests of pensioners and strengthen pensions.

"This announcement means that the costs of AP fund management will decrease and the return to pension savers and pensioners can instead increase. It is also positive that the pension group has supported a modernization of the AP funds."

Adding to this, AP2 Fund CEO, Eva Halvarsson, said: "So far, we only have the information that is stated in the press release.

"We will of course do our best to incorporate AP6's operations into AP2 in Gothenburg, with the ambition that this will be as good as possible for the Swedish pension system."

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