The premium pension is one of the four parts that can build up your pension. It complements the public pension and any occupational pension and individual pension savings. Each month, 2.5 per cent (2017) of your monthly salary and other income is allocated to premium pension and the total amount is then paid out in December each year. In terms of the entire “pension shake”, the premium pension amount is small. The annual provision for pension is namely 18.5%, but it is important to note that we ourselves can influence the return on the premium pension. With good fund selection over time, this part of the pension can provide large extra income during the retirement age.
Three things to consider
Many of us are less interested in looking more closely at both the amount invested and how it is placed. However, it is a good idea to do so because it can make the pensioner’s life a little more pleasant. With the right choice, the PPM money can even give a hefty gold edge on life after you have retired. There are three things you can think of a little extra now that the 2016 PPM money falls into.
- The deposit is distributed according to existing choices
When the state makes the deposit of your PPM money, the funds will automatically be distributed according to existing choices. It is therefore good to review what choices you have made earlier. Have your chosen funds yielded the expected return or has the outcome improved / deteriorated? Compare easily with the stock market trend as a whole, or the industry index in case the funds are a bit more specialized. Do you need to make any changes or are you satisfied?
When you make your comparisons, please pay extra attention to the funds’ fees. Over time, the fees play a very important role for the return and even single tenths can make a big difference. It is at Pensionsmyndigheten.se that you find the entrances to review your premium pension. The site has a very educational approach so that even you who have limited knowledge can quite easily make comparisons and possibly change funds.
- If you do not make a choice, the money is placed in the “Sofa”
When the PPM system was introduced, the government and parliament understood that all citizens would not be able to cope or want to make their own fund choices. Therefore, the fund AP7 Såfa was created – a fund which is popularly called “the sofa”. This fund is actually very good and it has yielded a return that far exceeds what many of the (the more expensive) options have given over time. AP7 Såfa is a purely equity fund, but there are also options that have elements of interest. If you have a long way to go to the pension, you can safely let the PPM money go into AP7 Såfa. If you have a little shorter time left before retirement, you may want to consider placing the money in slightly safer alternatives.
- Manage yourself – do not assign the assignment to pension advisers
PPM management means that you give a pension adviser the responsibility to place your PPM money. It is a solution that may sound tempting, but there are really only disadvantages of renting out the assignment to place the money. First, the advisers charge fees for their management. These fees are in addition to the funds’ own fees. Secondly, it has been shown that the majority of advisers actually underperform. The fact that several of the advisors have shown themselves to pursue their activities with everything other than the interests of the pension savers (Falcon Funds, Allra, etc.) is another thing to mention in the context.