Norway’s Storebrand has finally signed a pensions contract with the municipality of Vestland, after the legal attempt by incumbent provider KLP to halt the process ended in failure.
On Friday, a judge in the Oslo Country Court ruled against KLP’s request for an injunction preventing the contract from being signed.
KLP, a near-monopolistic provider of Norwegian municipal pensions, had argued in the case that the tender process leading to Storebrand winning the two-year contract had been unfair.
Ingrid Holm Svendsen, director of the department of organisational services and finance at Vestland County Municipality, said: “We confirm that the court has given Vestland County Municipality full support in the case and also granted legal costs.”
These were decisions the local authority was of course very happy with, she said, adding that Vestland would now implement the county council’s decision and enter into a contract with Storebrand.
Storebrand’s head of public sector, Jon Hippe, told IPE: “First of all, this is good news for Vestland, because it means they are now able to avoid a lot of practical problems.”
Last month, when KLP was seeking the injunction, Vestland said that as it had ongoing obligations to pay pensions to retired former employees, if it did not sign a contract with Storebrand as planned, it would have to find an alternative solution such as a direct procurement.
Hippe said the contract was finally signed on Friday around lunchtime immediately after the court made its decision known.
‘Alternative return’ inclusion
Marianne Sevaldsen, executive vice president for KLP’s life insurance operation, told IPE: “We take note of the ruling, and also believe that it emerged in court that KLP had the cheapest offer and the best quality.”
Sevaldsen said KLP now needed to study the premises for the ruling in more detail before it could comment on the case further.
However, Hippe disputed KLP’s claim that the court proceedings supported the view that its offer had been the cheapest and best.
He told IPE the precise point of the debate had been whether it was fair in the procurement procedure to include a certain type of investment loss – known as the alternative return – or not.
“When you add in that loss, KLP is the more expensive, and the court said that this amount should be calculated according to standard methods,” Hippe said.
Storebrand is one of the pension providers to have re-entered the market for local authority pension provision in Norway recently.
Changes to market conditions, such as the introduction of a new hybrid public-sector pension scheme, have opened the way for more competition in the market long dominated by KLP, although this depends on the municipalities’ willingness to put their pension contracts out to public tender.
Hippe said he hoped the court’s decision not to grant the injunction in the Vestland case would make it easier for other Norwegian municipalities to put their pension provision out to tender next year.
“If KLP had won this claim, then they would have had a clearer right to go to court over this issue, all of which takes a lot of time for the municipalities,” he said.
As things now stand, the issue of whether the alternative return must be included in the assessment of competition bids has been clarified, Hippe said, because the Oslo judge had written a very detailed judgement.
The Vestland pension scheme has 11,000 active and retired members, and NOK3.7bn (€348m) in assets under management.