Financial sector industry association Finance Norway (Finans Norge) has criticised the draft pensions legislation the government put to parliament last week, saying it fails to explain why a key idea aired in the consultation was not included.
Stefi Kierulf Prytz, director of life insurance and pensions at the association, said: “Finance Norway has for called for changes in the regulations for guaranteed products a long time, and it’s good that the government has now followed up some of the proposals.
“At the same time, it’s very unfortunate that the ministry isn’t proposing changes to the regulations for buffer capital, so customers with guaranteed products can have better management by having more equities holdings and better use of risk capacity,” she said.
The lobby group said the extensive round of consultation was not reflected in the bill, and there was no explanation why the Norwegian FSA’s proposal for a new buffer model for guaranteed products had not been followed up.
She was referring to the proposal the Norwegian government submitted to the country’s legislature last week, which contained a bill on changes to the conditions around guaranteed pensions and another aimed at extending access to workplace pensions for younger workers and part-timers, among other measures.
The association had expected a proposal to be submitted for a completely new buffer solution, Kierulf Prytz said.
“We will take a closer look at the proposals that are now available and see what effect they will have on the challenges for guaranteed products that Finance Norway and the industry have been addressing for several years, but our initial assessment is that the proposals don’t give pension providers the flexibility they need to give customers better management of guaranteed pension agreements,” she said.
However, the bill did include proposals that Finance Norway had advocated and supported, the group said.
These included the idea of providers being allowed to offer paid-up policyholders compensation by converting ordinary paid-up policies into paid-up policies with investment options, as well as the proposal to extend the threshold values in order to reduce the payment period for paid-up policies with low benefits– and to transfer small pension accruals from benefit schemes to individual pension schemes.
In a consultation memorandum from the FSA two years ago with proposals for changes in the regulations for guaranteed pension products, the watchdog recommended that providers merge additional provisions and price adjustment funds into a common buffer fund that was allocated to the individual contract.
That buffer fund should be able to cover all return risk for the pension providers, it said at the time, and proposed there be no upper limit set for the size of the buffer fund during the savings period. For individual contracts, however, the FSA did propose setting an upper limit for the buffer fund’s size during the payment period.