Milking the system
The daily bread of Norwegian MPs, certainly as far as their pensions are concerned, is thickly buttered indeed. While the members of the unicameral Norwegian parliament, or Storting, discuss reforms to the state pension system that would extend the working life required to achieve the maximum pension from the present
40 years to 43, they themselves are sitting pretty with a full pension after just 12 years.
This makes the pension scheme enjoyed by Norway’s MPs one of the most generous in Europe. Not surprisingly, a variety of strong views have been expressed on the subject.
At present, the Storting has 165 MPs. The current annual salary for an MP is NOK545,000 (E65,6711); it is based on that of a head of department in the public service. Members of the government earn NOK800,000; the prime minister earns NOK975,000. “On a European level MPs’ salaries are quite low,” says Hans Brattestå, secretary general of the parliament.
They certainly do not rank among the best salaries for parliamentarians in Europe: MPs in France, Germany and the UK, all of which have a lower cost of living, earn more. But while the grass of working life might be greener in these countries among others, the pasture of pension provision for Norway’s MPs is about as lush as it gets.
The pension scheme for Norwegian MPs was set up in 1950. It is managed by the Storting’s administrative departments, under the supervision of a board of directors that is a cross-party committee elected every four years. The head of the board is also appointed by the Storting.
For each parliamentary period of four years the member accumulates a pension equivalent to 22% of final salary. So after serving for two parliamentary periods the member can accumulate a pension of 44% of final salary, and after three periods or 12 years the member will have accumulated the maximum pension of 66% of final salary. The constitution does not allow members to leave before the end of a parliamentary period.
The pension arrangements for ministers are still more generous. In addition to their higher salaries, the full pension accumulates after just six years. For three years of service the pension is 42% of salary after which 5% is added for each subsequent year to a maximum of 57%.
MPs must serve a minimum of three years to qualify for a pension; the average length of service curently stands at around nine years. Members contribute just 2% of salary to the pay-as-you-go scheme. For taxation purposes the pension payments are treated like ordinary incomes except that the social security contribution of 7.8% is replaced by a tax levy of 3%.
The pension is adjusted in line with increases in the MP’s salary. In 1996, many benefits that had been paid separately were integrated into the salary, with the result that the basic salary increased by around 28%. The pension increased proportionately, even for those who had already retired. “These aspects could be criticised,” concedes Brattestå. “But the reforms of the state system will change the mechanism whereby pensions are increased in line with salaries.”
All public service pensions arising from previous or subsequent employment affect entitlement to the parliamentary scheme such that the member receives no more than the full pension of the most generous scheme. Private pension plans, on the other hand, are not taken into account.
The retirement age is 65, although pensions may be drawn at an earlier stage if the sum of the member’s age and length of service amounts to 75 years or more. This is on condition that the individual does not have income from paid employment which exceeds the pension. Villeman Vinje, political adviser to the conservative party, believes that the 75-year rule will be abolished as a result of the reform of the pension system that is being debated in the parliament. It is not possible to draw the pension before a member ceases to be a MP.
Another aspect of the pension scheme that may raise a few eyebrows is the fact that there is no actuarial reduction in cases of early retirement. According to the parliament’s administration department, actuarial reductions for early retirement will not be implemented before 2010 at the earliest.
If an MP dies while in service, the survivors’ pension will be based on the maximum pension entitlement. The pension of the surviving spouse is set at up to 60% of the deceased member’s pension, the precise level being determined by a means test. Survivors born after July 1 1950 receive 9% of the prevaling salary; this is not means-tested.
One of the most generous aspects of the benefits enjoyed by Norway’s MPs is the severance pay on loss of mandate. Rather than a one-off payment, MPs receive an ongoing payment, usually granted for one year, with extensions available for members who have still not found new employment after that time.
Until very recently the severance pay was equivalent to a full pension, even if an MP had only served one term of four years. When the pension was increased following the incorporation of benefits into the salary in 1996, the severance pay became still more generous. Eyewatering stuff; almost an incentive to lose one’s seat at the first election.
The present board decided that something had to be done about the balooning cost of severance pay and changed the basis of calculation to length of service, like the pension itself.
Currently there are around 1,100 members of the scheme, consisting of 165 serving MPs, 352 former members and surviving spouses receiving a pension, with the remainder being members and surviving spouses who have not yet reached pensionable age.
The main difference between the parliamentary scheme and the public servants’ scheme on which it is based is that public servants require 30 years to accumulate the full pension compared with 12 years for MPs: quite a difference.
Kjell Arne Bratli, adviser to the Presidium of Parliament, explains that “even politicians agree that the MPs’ pension is very generous indeed”.
Villeman Vinje, political adviser to the conservative party, goes further: “There’s no reason why MPs’ pensions should be any different from those of the population.”
One wouldn’t necessarily expect the right wing of politics to clamour for equality, but Norwegian politics, like its pension system, is not short of surprises.
Inger-Marie Ytterhorn, political adviser to the far right Progress Party argues that “there have to be changes to the system of MPs’ pensions; the public will not accept it being only them”. She suggests as a first step an increase in the qualifying period for a full pension from 12 to 16 years.
But secretary general Brattestå is concerned that this will deter people from chosing a career in politics: “I hope the 12-year rule will not change because it will be terribly difficult to recruit people to political life when they see that they will not be properly taken care of in retirement.”
While he agrees that certain aspects of the scheme need to be changed, his overriding concern is that people should not be deterred from a career in politics on financial grounds. “For me it’s the system to save the pluralism in parliament,” he says. “There are fewer and fewer people who are interested in a life in politics. At the last election quite a few young promising MPs with a good education left because they didn’t see it as advantageous.”
He adds: “I would say that more than half of MPs have a lower salary now than before they came to parliament. The mayor of Oslo has a salary that is twice the salary of an MP.”
The maximum pension for an MP is 20% less than the maximum pension for a state employee. “That’s not much to live off when you have been at the top level serving society,” says Brattestå.
He adds: “It’s very easy to criticise, especially when fuelled by bad journalism which you see a lot of now in Norway. The journalists in Norway, some of the most privileged people you will find, will not be happy until they see MPs begging in the street. It doesn’t matter if you give concessions: the tabloid media will always find something new.”
There is a review body, of sorts. The Parlamentary Salaries Commision sets the basic parliamentary salary once a year; any recommendations made by the commission have to be adopted by the parliament in accordance with the constitution.
It is appointed by the “praesidium” of the parliament which consists of the six speakers of parliament representing five parties. It consists of a reverend, a professor of sociology, and a judge heading the team. “None of these are people who think that politicians should
be expecially well taken care of,” says Brattestå.
He adds: “MPs felt so uncomfortable having to decide about their own salaries and felt it would add credibility if there was an external review body.”
Villeman of the conservative party recalls things differently. “The committee was set up following pressure from the public,” he says. The ferocious Norwegian press must be to blame
As long as the committee remains an internally appointed body it will always be handicapped in terms of credibility.
Brattestå believes that MPs will see their pensions “somewhat reduced” following the reform of the state system.
Anything else may not be politically feasible. Through the dichotomy of a relatively modest salary and extravagantly feathered retirement nests, it seems that Norway’s MPs have needlessly created problems for themselves.