AP2's objective is to maximize the long-term return on pension assets under management.
The national retirement pension comprises an income-based pension, a premium pension and/or a guarantee pension. Income-based pension contributions are transferred to the system's buffer funds: the First, Second, Third and Fourth AP funds. Each fund receives a quarter of these pension contributions and finances a quarter of pension disbursements. The Sixth AP Fund is also considered a buffer fund, but differs from the others in certain respects, different investment regulations being one.
When the new pension system was introduced in 2001, each of the First, Second, Third and Fourth AP funds was allocated SEK 134 billion in pension assets. The AP funds' capital constitutes a financial buffer within the pension system, designed to balance deficits arising on the difference between pension contributions received and pension disbursements made, which derive from demographic and/or economic fluctuations. The Second AP Fund's primary long-term objective is to minimize the negative consequences on future pensions that derive from applying the 'brake' (automatic balancing) to the national pension system.
In all, the buffer funds account for about 14 percent of total pension assets, being the part exposed to financial market risk. The other 90 percent derives from the combined value of contribution assets. These mirror the value of future pension contributions and are unaffected by the performance of the financial markets. The size of these contribution assets is determined primarily by salary and wage levels, levels of employment and retirement age.