Norwegian municipal pensions giant KLP said it expects the competition complaint lodged by rival Storebrand with the supervisory body of the European Free Trade Association (EFTA) organisation to take a long time to reach a conclusion.

Last autumn, financial group Storebrand – which re-entered the market for municipal pensions provision in Norway in 2019 – complained to the EFTA Surveillance Authority (ESA) in relation to the reluctance by many local authorities to put their pension schemes out to tender.

It asked ESA to clarify that there was an obligation to tender when procuring occupational pensions for municipalities and state health organisations.

On March 24 this year, the Norwegian Ministry of Local Government and Regional Development wrote to ESA, in response to its invitation to comment on the Storebrand complaint set out by the law firm Mageli.

In its first quarter report released yesterday, KLP said in the outlook section: “Last year, Storebrand complained to Norway before ESA, alleging that KLP receives illegal state aid, and that Norwegian municipalities and healthcare organisations have broken the rules for public procurement.

“The Norwegian State, at the Ministry of Local Government and District Affairs, has responded to ESA in a letter rejecting the complaints.

“The case is now with ESA, and it could be a process that lasts for a long time,” the NOK948bn (€80.5bn) financial group said.

KLP had a monopoly in the outsourced provision of municipal pensions in Norway for several years until Storebrand re-entered the market in 2019 and won some of the few tenders that were then put out by some local authorities, as well as pensions business from some public sector companies.

The new competition in the sector has been encouraged by the Norwegian Competition Authority (Konkurransetilsynet) and others, but the majority of municipalities have not put their scheme out to tender.

Jon Hippe, head of the public sector at Storebrand, told IPE that Storebrand had been surprised by the letters to ESA from the Norwegian government, because the answers it gave on public procurement and state aid built on two common arguments.

“First, that public sector occupational pensions are in fact social security and not a market based provision of insured occupational pensions.

“And second, that KLP is not an economic actor according to relevant EU regulation,” Hippe said.

Storebrand disputed both these allegations, he said.

“In Norway finance and insurance regulation clearly state that occupational pensions are different from social security and that occupational pensions are provided in a market where competition between several providers is the main tool of securing customers interest and efficient provision,” he added.

“Moreover, KLP is a large private financial institution taking part in all financial markets offering products to the general public,” Hippe said adding that this meant KLP was clearly an economic actor according to both state aid and public procurement regulation.

Hippe said Storebrand expected ESA to follow up this process and give its next response later this year.

“Storebrand have a long time perspective on public sector occupational pension, and will stay in the market,” he continued.

Hippe said the firm had delivered an offer to one municipality this week, and several more tender processes were coming in the autumn.

“Regardless of the Norwegian answer to ESA, municipalities can reduce their pension costs by conducting tender processes,” he said.

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