Norway on brink of first DC scheme
Norway's first major defined contribution (DC) pension scheme is in the pipeline following a report by the Norwegian government, which paves the way for funds to begin preparing DC models. And predictions are that a whole host of Norwegian companies will make the switch when new pensions tax laws are ratified at the end of the year.
Aker Maritime, the Oslo based shipping group with 8,500 employees is currently developing a model for its scheme, which could receive contributions of around Nkr100m ($13.3m) per annum.
The move comes after the publication last month of proposals concerning DC schemes by the Norwegian ministry of finance, which are being discussed by parliament this month.
According to Hilda Olsen, deputy director of finance at the ministry, the government has expressed its desire for DC provision, but needs to iron out issues of taxation, regulation and contributions. In a way, we are already there, but we should see some concrete legislation by the year end," she says.
Under the new Aker Maritime scheme, employer contribution will be between 3-5% of basic employee salary, with a suggested voluntary employee top up of 5-10%.
Current annual contributions to Aker's defined benefit (DB) scheme are around Nkr80m, but the new scheme is also to incorporate a company insurance package against death and disability. Workers within 15 years of retirement, it is suggested, will stay in the present DB scheme.
In all other cases, the liabilities for contributions to the DB scheme will be accounted for on an insurance fund basis, before the employees move to the new scheme.
Both fund amounts accrued will then be paid out upon retirement.
Terje Vamnes, vice president of corporate finance at Aker Maritime, said: "The move to DC will give us a modern, flexible pension scheme to complement Norway's social security system, that also permits us greater cost control in our pensions provisions. With DC it will be easier to know our costs without resorting to complex calculations in the book reserve system."
After two years in development, the company has selected Storebrand, the Norwegian insurance group as partners in the DC venture, with Storebrand carrying out fund management for both the new DC scheme and the existing DB provision.
Vamnes added: "The most important issue now is to persuade our em-ployees and the unions of the value of this development, and bearing this process in mind we hope the scheme will be fully implemented by the beginning of the year 2000." Hugh Wheelan"