The Impact of Fund Switching on Pension Returns A Study of ITP 1 Savers

Abstract

This thesis investigates how individuals' future pension savings are affected by fund switching within the ITP 1 occupational pension system. Further, the study evaluates whether an investment strategy that considers the level of the policy rate can lead to improved long-term pension performance. The fund data were collected from the respective fund’s website while data on macroeconomic parameters were gathered from Ekonomifakta’s website. Through OLS-regression, Monte Carlo method and hypothesis testing the data were analysed and then compared to economic theories such as Modern Portfolio and Asset Allocation theory. The results indicate that switching to a fund insurance with a larger portion of equity could increase the pension savings, although questioned by the increased risk according to the Sharpe ratio. Regarding the consideration of the macroeconomic environment, the results show that an active allocation strategy based on the policy rate level is efficient in increasing the pension savings, without adding too much risk. These findings provide empirical support for a policy rate-guided allocation strategy and offer practical implications for Swedish pension savers. This study highlights the importance of understanding and managing one’s occupational pension, and suggests future research should focus on including a larger number of funds and incorporate the additional administration and moving fees.