The Norwegian government has put a proposal before parliament today changing two major aspects of pension law – both with the ultimate aim of boosting the amount of private occupational pension income the population stands to get in retirement.
The government announced it has presented a legislative proposal to the Storting entitled “Prop. 223 L(2020–2021)” which contains two bills – one proposing a pension “from the first krone” in private occupational pension schemes, and the other putting forward changes to the regulations for guaranteed pension products.
The latter bill involves defined benefit (DB) pension schemes and paid-up policies from such schemes, and is meant to free providers up to offer to convert these products into pensions that include potentially higher-returning but more risky investment choices.
Both sets of changes have been under discussion for some time in Norway.
Finance Minister Jan Tore Sanner said: “The right to a pension from the first krone for all employees in the private sector is an important measure for a more inclusive working life”.
The government’s proposal would in particular strengthen the right to a pension for young people, part-time employees and the low-paid, he said.
Regarding the guaranteed pension products bill, Sanner said: “The changes that the government is now proposing will benefit customers through increased freedom of choice and flexibility.”
At the moment, employers in Norway with defined contribution schemes are only obliged to start savings for staff for annual income above the national insurance basic amount (folketrygdens grunnbeløp or ‘1G’) of an individual’s salary (around NOK100,000), but the new plan would require them to save at least 2% of all an employee’s income into a pension.
The bill would also see more part-time workers included in pension schemes by abolishing the current condition that their job entails working at least 20% of full-time hours.
It would also reduce the lower age limit for scheme participation to 13 from 20, to the same minimum age that applies in Norway’s national insurance scheme.
The changes are all set to enter into law on 1 January 2023, but the government said that since the current rules for deductions relating to 1G were optional for employers, those wanting to could start changing their schemes immediately.
“No separate transitional rules have been proposed, but the government will return to the Storting with an assessment of possible temporary compensation to employers before the changes take effect,” the government said in the announcement.
On guaranteed pensions, the government is proposing letting providers offer compensation for the interest rate-guarantee if paid-up policyholders want to convert ordinary paid-up policies into paid-up policies with investment options.
It is also proposing changes for people with relatively low pension income, firstly extending limits in order to reduce the payment periods for paid-up pensions, and secondly making it easier to transfer small pension accruals in DB schemes to individual pension plans – rather than having paid-up pensions issued.
Also included in the guaranteed pensions bill is a legal basis for regulations to allow more flexibility in how returns on profits in guaranteed products are applied, the ministry said.