Norway’s leading local authority pension scheme provider believes the impact of municipal reform on its client base will be minor.
Under the reform, the number of administrative regions in the country is being reduced, creating larger local authorities. This could give them critical mass to justify forming their own independent pension funds. Kommunal Landspensjonskasse (KLP) is the main provider of staff pension schemes for local authorities.
Reporting interim figures for July to September, KLP said: “There were small movements in the customer volume, but the ongoing council and regional reforms could lead to small changes and the company is following this closely.”
In the the case of Asker, for example – a municipality close to Oslo – the region is merging with the neighbouring municipalities of Hurum and Røyken at the beginning of 2020.
Since Asker already has its own pension fund, one option is for the new merged authority to use this arrangement for incoming staff, rather than KLP, but no decision on this has yet been taken by the local authorities.
Oliver Siem, KLP’s director for finance, told IPE: “We know many municipalities will merge, but only a few that merge will potentially move into a municipality with a self-managed pension fund.
“Our estimations show that the potential volume of pensions assets will be limited and not significant to our business.”
KLP reported small changes to its overall customer volume in the third quarter. The group’s premium income in the period fell to NOK8.8bn (€933m) from NOK10bn in the same period last year.
In the third quarter, KLP reported that it had picked up its first new independent municipal pension fund client through offering a new combination of services.
“This is the first customer KLP has won with a new solution for independent pension funds,” the firm said – although it declined to name the new client.
While KLP Forsikringservice (Insurance Service) is not a new line of business, it has mainly provided actuarial services in the past, Siem explained.
“The new client has asked for several services provided by the company, and in that sense [it is] the first client on a broader platform,” he said.
But KLP does not expect this type of service to become a large part of its business as there are only a limited number of potential clients, he added.