The independent pension funds run by Norway’s municipalities all beat the dominant pension provider in the sector, KLP, on returns in 2020 – with two generating twice KLP’s investment profit for the year, data show.
According to a news report in Norwegian specialist weekly Kommunal Rapport, which gathered figures from the annual reports of the country’s 21 municipal pension funds, the pension funds of Tromsø and Drammen topped the 2020 returns ranking, with 8.6% apiece – more than double the return generated by KLP.
In February, KLP – which has a virtual monopoly in the market for municipal pensions for local authorities without their own fund – reported a 4.2% value-adjusted return on customer funds in 2020, with group total assets rising to NOK807bn from NOK763bn at the end of 2019.
The pension funds of Haugesund and Halden came in with 2020 value-adjusted returns of just below the two leaders, with 8.3% each, according to the report.
Even the municipal pension funds with the lowest percentage returns last year – Sandefjord and Asker – were ahead of KLP, having generated 5.1% and 5.3% respectively, in a year that saw some severe financial market swings as a result of the pandemic crisis.
Historical figures from the Norwegian FSA (Finanstilsynet) show that the municipal pension funds have returned an average of 5.4% in the 10 years between 2010 to 2019, according to Kommunal Rapport.
Oslo Pensionsforsiking (OPF), the largest municipal pension fund, was number five in Kommunal Rapport’s ranking.
In February OPF posted a 7.9% value-adjusted return on customer funds for 2020, and said listed equities had been the strongest-performing asset class, generating 17.4% in the year.
The Norwegian government has been trying to encourage more competition in the Norwegian municipal pensions market, alongside the introduction last year of a new hybrid public service pension, which has lower barriers to entry for providers than the older scheme.
Minister of Local Government Nikolai Astrup told IPE it was positive that Storebrand was returning to the municipal pensions market, after several years when KLP had been the sole provider of occupational pensions to Norwegian municipalities and counties.
“The individual municipality and county, as an autonomous local government, have to assess their optimal alternative, whether it is KLP, Storebrand or their own pension fund,” he said.
The recent municipal reform in Norway saw several local authorities merging, resulting in some municipal pension funds increasing in size as merging authorities left the KLP scheme in favour of joining the existing pension fund.