Norwegian pensions on track to be region's most cost-effective – study
The income-based occupational pensions market in Norway is competitive and cost-effective compared with its Swedish and Danish counterparts, despite the fact it still has a relatively small volume of assets, according to a study conducted for industry organisation Finance Norway (Finans Norges).
In its conclusions, PA Consulting said in its study: “A comprehensive evaluation of cost efficiency in the countries showed that the Norwegian market has the preconditions to be able to become the most cost-effective market for income-based pensions in Scandinavia.”
Administration costs per member were on the level of those in Sweden, while equivalent costs in Denmark were significantly higher.
PA Consulting said it was important to note the Norwegian market was still at an early stage, with a short history and markedly lower level of assets under management than corresponding schemes in Sweden and Denmark.
“The volume within the income-based pensions market in Norway will increase in coming years, and this will give life insurance companies greater economies of scale, which can form the basis for price reductions in the market,” the study concluded.
Competition has been shown to work well in the Norwegian market, and the supply chain is efficient, the study said.
“This supports the assumption the market will succeed in achieving economies of scale, and that scale benefits will be reflected in lower market prices,” it said.
The coverage of occupational schemes in Norway is very broad compared with Sweden and Denmark, with businesses having great freedom of choice, it said.
According to the study, the way workplace pensions are organised in Sweden and Denmark means a large number of individuals and businesses are excluded from the most effective schemes, and consequently charged much higher costs.
Commenting on the study, Finance Norway’s chief executive Idar Kreutzer said he hoped the report would be considered when the social partners came to assess the pension system.
“Finance Norway does not rule out the possibility that there may be room for improvement in the current pension systems in the private sector but believes this must happen within the current main model,” he said.
Most private sector employees in Norway belong to a defined contribution scheme, Finance Norway said.
The market expanded after the introduction of mandatory occupational pensions in 2006.
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