sou · GTB387d3 · 2006-01-01 00:00:00 — is of the opinion that changes that need to be made should be made gradually. It is difficult to assess in advance the effect each measure will have on the range of funds. Naturally, it is even more difficult to judge the effects of a combination of different measures. feels PPM should already now use the tools the authority has at its disposal to influence the range of funds. According to the committees directives, the committee is also to consider the risk for systematically poor outcomes. The assign- ment does not refer to the risk for poor outcomes. Subsequently, the committee does not consider it a solution to exclude invest- ment alternatives solely on the basis that they are expected to dis- play a wide spread of returns over time. In addition, it is very pos- sible that funds classified today as relatively high-risk funds will be reclassified in the future. The committees basic stand is that a fund category or type of fund cannot in itself be considered unnecessary or impractical in a well compiled portfolio for pension investments. To reduce the risk of systematically poor outcomes one solution might be to develop a better decision-making support to help pen- sion savers evaluate their choices instead of excluding certain cate- gories of funds. PPMs tools to influence the range of funds PPM has set a limit in which a fund manager may register maxi- mum 25 funds with the authority. However, when several such fund managers make up the same management group, the groups combined fund managers may register a combined maximum of 50 funds. feels it should be considered if the current limits should be changed back to the number of funds that were permitted when the system was introduced (10 and 15 funds re- spectively). A family of generation funds should be counted as one fund. In the capacity of investor PPM demands a rebate on the fund investment fee that pension savers pay. The discount is motivated by the fact that PPM a significant portion of such costs that otherwise would fall on the fund company, including distribution and customer service costs. The primary purpose of the discount is to ensure that pension savers receive a reasonable share of the benefits of economies of scale in investment management. Ac- cording to the committee, PPM should take steps to a greater ex- tent transfer amounts to the pension savers which otherwise will become profits in the fund companies. feels that PPM should continuously review the price-reduction model so it not only generates low investment costs as above but also an at- tractive selection of funds for the investors. In addition, it might be worth considering a differentiation of rebates for different fund categories, such as share funds and interest-bearing funds. According to the committee, PPM should use the option already available to extract a registration fee. Such a fee can be used to limit the influx of new funds. New tools to influence the range of funds PPM should be able to extract an annual feel for each fund regis- tered with the authority. It should be possible to introduce the option of setting a time limit within which a fund should achieve a certain market share in the system. Funds that cannot meet the time limit would subse- quently be excluded from the selection. Information to pension savers PPMs communication and information efforts during the first round of choice in 2000 must be considered very successful since one of the principal objectives was to achieve as many choosers as possible. At the same time the result is not com- pletely uncontroversial. It cannot be ignored that the campaign was very deliberate in its message to encourage savers to make a choice. In respect to providing decision-making support for pen- sion savers in making their first premium pension selection, the success rate was more limited. As an object of comparison, the campaign has its limitations when the following years initiatives are to be evaluated. Despite the relatively extensive information activities conducted by the responsible authorities during the years after the first round of choice, conducted surveys indicate that many pension savers have not yet really understood what the old-age pension scheme means or how they can handle their own premium pension invest- ments. While difficult to evaluate the information incentives, the results indicate there is a need for a different type of information and guidance than PPM provides today. Against this background, it is questionable if PPMs opportunities to fulfil its information assignment was realistic and if it suits the purpose to continue to divide the responsibility for information incentives among two authorities; PPM and () that administer the guarantee and income pen- sion system. Alongside individual account-related information, PPMs con- tinued information assignment should be to provide generally pre- pared information that give pension savers a blanket perspective for old-age pension and that explains the ramification of the pension saver being financially in charge of his/her investments. The overall purpose of the information assignment should be to inform pen- sion savers about what decision-making support is available within the scheme to help them manage their premium pension. This means providing information about the old-age pension schemes design and the options the premium pension system provides to influence individual pension. PPM should ensure that pension savers have access to guidance in form of decision-making support to facilitate management of premium pension savings and reduce the risk of systematically poor outcomes. All pension savers should have access to decision-making sup- port. A reasonable solution would be that pension savers who want to refrain from all or some guidance can do so by actively cancel- ling the process. It may suffice for some savers to receive help in choosing which fund type to invest their premium pension money in before choosing freely on the fund market. Other pension savers may require additional help in deciding their risk profile and a pro- posal for distributing their assets. Pension savers that elect to be guided throughout the process should be presented with a limited selection of broad, cost-effective funds, which means they are guided to a highly diversified fund portfolio managed at low fees. Choosing a good, manager is difficult and requires consider- able effort from the pension saver. proposes therefore that pension savers receive decision-making support when selecting the actual fund. To facilitate pension savers management, their situation in making a choice should be made easier and they should also receive help in evaluating the choices they make. feels that the issue of pension savers opportunities to evaluate their choices has not been sufficiently prioritised so far. Guidance in this aspect should contain reference objects that pension savers can use to evaluate their earlier choices with, so-called comparative norms. It should also be possible to inform pension savers if the develop- ment of the value of their accounts has been considerably less than that of some relevant index, so called wake-up calls. Questions about PPMs annuity In the long run, PPM should give pension savers the possibility to gradually switch from the unit-linked insurance to a life annuity. This option should be available starting the month the pension saver turns 61. It is too early to now introduce the possibility for pension savers to gradually switch to annuity but PPM should make this change when motivated by demand and costs. should instead provide and inform about alternatives that allow pension savers to even out the risk of their investments toward the close of their savings period. proposes that it eventually be possible for pension savers to switch between the different insurance forms. does however feel that the government should appoint a special investigator to examine the conditions for dis- mantling PPMs annuity activities. In practice this means there is a guarantee to premium pension savers that risks impacting on the government budget although the premium pension scheme is sup- posed to be autonomous. From this perspective the annuity can be described as an anomaly in the pension scheme. The investigators assignment should also include the forms for carrying out the ac- tual dismantling of PPMs annuity. In addition, a structure should be considered where such products are supplied by private life-in- surance companies. Until further notice, PPMs annuity activities will remain intact. therefore wants to emphasise the importance of the guarantee to pension savers that the annuity entails at a low level. One possible option that the government should con- sider is to review the current product regulations for PPMs annu- ity. Administration of the old-age pension scheme The problems that exist within the pension administration would to all extents be resolved by making an independent, separate au- thority responsible for pension administration. Without presenting a detailed proposal, the committee therefore suggests that a sepa- rate and independent pension authority be set up to handle pension administration.