October 24, 2016 / 7:10 AM / 3 years ago

RPT-Payments row puts Swedish state pension scheme under scrutiny

(Repeats story from Oct. 21 with no changes to text)

STOCKHOLM, Oct 24 (Reuters) - A payments dispute with a Maltese firm that holds money invested by thousands of Swedish savers highlights clear faults in the country’s public pension system that must be rectified, the financial markets minister said on Friday.

In Sweden, savers may opt to invest a portion of their state pension in private funds that have entered an agreement with the Swedish Pension Agency.

One such fund, Malta-based Falcon Funds, was reported to Swedish police last week, the agency says, for refusing to repay savers their money after the agency terminated the fund’s agreement in June. The fund denies wrongdoing and says it will return the money as soon as assets can be sold.

“We will leave no stone unturned to make sure this does not happen again. It highlights obvious faults in the premium pension system,” financial markets minister Per Bolund told Reuters.

Only a portion of a person’s pension money may be placed in private funds. That proportion currently totals around 900 billion Swedish crowns ($100 billion). Around 2.4 billion crowns was invested by some 22,000 savers with Falcon.

Falcon Funds has so far returned 1.25 billion crowns of that sum, but pension agency spokesman Jimmy Larsson-Hagberg said the rest may be lost.

That raises questions about the integrity of the system, Bolund said. “I think this makes people worried and that is a strong reason why we should shore (it) up,” he said.

Bolund said the government might introduce new legislation or ask agencies supervising the pension system to tighten their rules.

Following an investigation, the pension agency said Falcon Funds had employed a company using questionable methods to get savers to sign over money, and accused the firm of investing in financial instruments designed to obstruct visibility.

The board of Falcon Funds disputed the agency’s right to cancel the agreement, adding that Swedish prosecutors found nothing illegal in the way pension money has been transferred to the firm.

“Falcon Funds SICAV does not believe that it has contributed to any illegal activities,” said Alf-Petter Svensson, a lawyer representing its board. “If anyone has acted illegally, the board will take all possible legal measures to protect the interests of pension savers.”

He said the money would be returned but might be less than 2.4 billion crowns because the assets, which were being sold “in exceptional circumstances”, may have depreciated since the agency cancelled the agreement.

Falcon Funds returned the 1.25 billion crowns after being ordered to do so by the Maltese Financial Supervisory Authority.

“They have made every effort not to return the money,” Larsson-Hagberg said.

$1 = 8.9118 Swedish crowns Reporting by Johan Ahlander; editing by John Stonestreet, Larry King

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