AP7's default fund beat 87% of active pension choosers

When Sweden launched its Premium Pension System in 2000, requiring workers to direct 2.5% of pensionable income into individually selected funds, the government's approach was to maximize choice: an initial catalog of 465 approved funds were available for citizens to research and pick from, reflecting a design philosophy that more options and more personal control would produce better outcomes for savers than a single government-managed fund.

Anticipating that many citizens would never make an active choice at all, the system's architects created AP7 (Sjunde AP-fonden), a state agency tasked with managing a low-cost default fund — originally called Premiesparfonden, later restructured as AP7 Såfa — that anyone who declined to actively select funds would be automatically enrolled in, with no obligation to ever revisit that choice.

AP7's default fund runs a low-cost, broadly diversified, age-adjusted index strategy, requiring no active decisions from savers at any point — the fund simply exists as the outcome for everyone who never chose otherwise, alongside the hundreds of actively managed funds available to whoever wanted to pick their own.

Engineered the default as a low-cost, diversified, age-adjusted index fund, so the inactive majority got a strategy that beat 87% of active choosers.

Most citizens never actively chose, so the default became the actual experience for the majority.

Low-cost index strategy avoided high fees and behavioral mistakes that hurt active choosers.

Age-adjusted diversification compounded reliably over time, outperforming average active choices.

When most people won't choose, engineer the default as the real product.

According to the Swedish Pensions Agency's 2025 analysis, just over 13% of savers who actively selected their own funds outperformed AP7's default fund over the long term — meaning roughly 87% of people who spent time and effort choosing their own funds would have done better simply doing nothing. The agency's data additionally found that the more often a saver switched funds, the worse their average returns tended to be, and over the preceding decade AP7's default produced an average annual return of 13.5% against an average 7.8% for actively chosen private funds.