Financial Supervision Authority: rights and obligations of subscribers to II pillar of the pension system must be better balanced
The Financial Supervision Authority decided that the management company's application to change the issue fee rate of the units of the mandatory pension funds SEB Pension Fund Conservative (SEB Konservatiivne Pensionifond) and SEB Pension Fund Progressive (SEB Progressiivne Pensionifond) leaves the subscribers to these funds too short an advance notice period for a possible re-evaluation of their investment decisions. Therefore SEB Ühispanga Fondid can apply a different unit issue fee instead of the 1% issue fee currently allowed pursuant to fund rules only starting from 1 January 2008.
"If the fee charged from the unit holders account differs next year from the fee allowed pursuant to fund rules thus far and a subscriber to an SEB Ühispanga Fondid II-pillar fund therefore wishes to switch funds, he or she is only left with one short month. Subscribers to the II-pillar mandatory pension system must be given sufficient time and information to make their decision. The Financial Supervision Authority considers that subscribers to the II pillar should be granted at least a 6-month advance notice period if the management companies want to change fund rules or, alternatively, the legislative regulation should be changed in such a way that people's right to switch II-pillar funds becomes easy and flexible," commented Raul Malmstein, Chairman of the Management Board of the Financial Supervision Authority.
Under the Funded Pensions Act, the issue fee rate of pension fund units may not be more than 3% until 1 January 2007. The legal regulation entering into force on 1 January 2007 will abolish the limit on II-pillar unit issue fees.
Therefore, we would like to draw the attention of II pillar subscribers to the fact that the price of the offered service may change in the future and not only in the positive direction. "We consider it necessary to apply a limit on pension fund unit issue fees also in the future, keeping it remarkably lower than the current 3%. Taking into account the specific features of II-pillar pension funds, there is a justified expectation that additional costs will not be inflicted on a unit holder or pension fund subscriber or that fees charged in connection with their assets will not be increased without a good reason and a sufficient advance notice period," Raul Malmstein said.