Amid intense debates between the regulator, industry and BETTER FINANCE over the proposal for the Pan-European Personal Pension (PEPP), a retirement savings investment product that stand to benefit not only European citizens as savers, but the entire E.U. economy, a story regarding the mobility of occupational pension plans stands out.
A piece published by the FT on the biggest pension fund of Sweden is indicative. The article ‘The key to keeping investment costs low? Avoid fund managers’ talks about the business model implemented by Alecta that allows it to maximise returns both on the balance sheets and from its holdings.
In a response to the difficulty for Swedish workers’ to move from one company to another without losing their acquired pension rights, Alecta was created as a mutual fund of different companies in the early 20th century. This way, workers could switch employers whilst their savings accounts remained within the same occupational pension fund.
Considering that the ownership of the fund is solely divided between the employers and employees, profits stay in-house, reducing management, administration, depositary fees and charges, commissions etc. and making pension products very effective.
This model is envisaged for the PEPP. Besides being cost-effective, the national compartments of PEPP providers would allow E.U. workers to switch employers and countries without having to risk their retirement savings.
Read here:
FT article here.