Norway’s dominant provider in the municipal pensions market has said the current rules around moving a local authority scheme to a new provider should be changed, and that it expects the authorities to do this soon – a re-writing of the law that could work in its favour.
However Storebrand has responded saying such a change is not on the cards.
KLP made the comments to IPE following the recent loss of the business it runs for the west Norwegian local authority of Øygarden to Storebrand in a competitive tender.
IPE asked the NOK814bn (€82.3bn) municipal pensions giant KLP for comment on the outcome of the Øygarden pensions tender – which will see Storebrand take NOK1.7bn of pension business from KLP from the end of this year – and on the competitive situation in the sector in general.
Marianne Sevaldsen, executive vice president of KLP’s life division, said: “We will first say that we think it is a shame to lose Øygarden only two years after the municipality chose KLP as a pension provider after a thorough pension tender process.”
KLP was in favour of competition, she said, and it had competed with pension funds all along before Storebrand recently returned to the market.
“At the same time, we believe that competition must take place on equal terms,” Sevaldsen said.
She said that as they stood, the rules on transferring pension schemes currently had some effects in the form of freeing up capital and obtaining a share of financial buffers from a new pension provider.
“This means that there may be other factors than price and quality that motivate municipalities to change pension provider,” she said.
“Therefore, we believe it is important that these rules are changed so that it is precisely price and quality that is competed for,” Sevaldsen said, adding that KLP had shown for a long time that it was competitive when it came to both costs, return on pension funds and the quality of its delivery.
At KLP, Sevaldsen said that throughout 2021, her company had witnessed an increasing focus on municipalities also emphasising the effects of the transfer rules in their case documents related to taking out pensions in tenders.
“Øygarden is no exception, and says that the main motivation for tenders is precisely to utilise the current transfer rules.
“Both we who are suppliers and the municipalities themselves expect that the authorities will soon close the unintended transfer effects,” she said.
Based on this, Sevaldsen said the municipality of Øygarden had also secured a reservation in the contract that could be reconsidered if the rules changed before the final transfer of the pension scheme has taken place.
She added that in other respects, KLP was continuing to work on gaining insight into, and knowledge of, Øygarden’s recent decision on a pension provider.
But Jon Hippe, head of public sector at Storebrand, told IPE in response that there was no proposal to change rules regarding transfer rules (flytteregler) for public occupational pensions.
He said that on the contrary, because the government had sent a proposal to parliament on guaranteed products which did not contain the more flexible buffer capital arrangement the industry had been hoping for, the insurance sector had sent a joint letter to the Ministry of Finance calling for a joint flexible buffer just for public occupational pensions.
“Whether this will result in a proposal for new legislation is yet unknown,” Hippe said, adding that it was also uncertain when it would be implemented.
He said the key point was that a new flexible buffer would, he understood, not prevent the freeing up of capital and the release of financial buffers.
It would instead mean a move from a standard system to one where conditions were decided by the providers themselves, he said.
“Storebrand welcomes a more flexible buffer, which will strengthen competition in the occupational pensions market,” Hippe said.
IPE has also contacted the Norwegian Ministry of Finance for comment on any potential change in the law regarding this.