Norwegian municipal pension provider KLP, which for several years faced almost no competition, has said the fact few of the country’s local authorities put their schemes out to tender last year was a “declaration of confidence” in it.
Reporting its 2021 financial results, including an 8.4% investment return, KLP said: “In 2021, relatively few municipalities had their pension scheme put out to tender.
“As market leader, KLP takes this as a major declaration of confidence, even though in the end it was two municipalities and several closed agreements that chose to terminate their agreements with KLP in 2021,” said the firm, whose total assets grew to NOK706.7bn (€69.4bn) by the end of the year, having expanded by NOK12.2bn.
However, KLP said that in total NOK4.5bn of pension assets had been moved away from its management during last year.
Norwegian financial group Storebrand has been actively bidding for municipal pension contracts held by KLP in the last two years, having re-entered the sector in connection with the introduction of the new public service pension.
KLP said the authorities had decided to introduce a buffer fund for municipal pension schemes from 1 January 2022, which replaced the exchange-rate adjustment fund and the additional provisions.
This is part of the Norwegian government’s bill on rules around guaranteed pension products.
“This was a long-awaited rule change that removes unfortunate arbitrage opportunities that lay in the previous regulations, and contributes to healthier competition in the market for public sector occupational pensions,” KLP said.
While the pension provider reported an 8.4% value-adjusted return on customers’ funds for 2021, including a 2.6% gain in the fourth quarter, the book return was 5.0% in the year and 1.4% in the quarter, it said.
Sverre Thornes, chief executive officer of KLP, said: “We are pleased that with the strong results for the fourth quarter and the whole of 2021, we can make an important financial contribution to our owners.
“The stock markets have performed very well in 2021, at the same time as interest rates have risen throughout the year. KLP is well equipped for the new year,” he said.
Within the collective portfolio, equities – which make up 30.9% of the portfolio – generated a 22.8% return in 2021, while long-term/hold-to-maturity bonds, the next-largest slice of the portfolio, produced a 3.5% return, KLP’s report showed.