Storebrand to offer 'flexible' DB pensions despite 2011 deadline
EUROPE - Corporate pensions provider Storebrand is on track to offer a breed of flexible defined benefit (DB) pension when Norway's new pension legislation comes into force in January 2011, despite the very tight deadline.
The legislation governs the state old-age pension system, Folketrygden, and the contractual supplementary occupational system AFP, but has necessitated bringing other occupational and private pension laws in line with the changes.
Jan Otto Risebrobakken, director of public affairs for Storebrand, told IPE: "The timing has been a major issue, but we will be on course to offer flexible defined benefit pensions."
There is a lot of work involved in making the changes, which will allow flexible withdrawal of pension benefits, beginning at any age between 62 and 75, he said.
"A major problem for us has been the process of working out this new legislation, which has come very late," he said.
"We have known for some time that this legislation is coming, but we still do not know exactly what it will look like.
"We have been working on hypothesis, but this process should have started two years ago."
In practical terms, the changes involve, not least, communication with scheme members, as well as talking with corporate sponsors, he said.
The first proposals are set to become law in January, but the Banking Law Commission is now working on a second set of proposals, which are expected to be passed as legislation in the summer of 2011.
The first set of changes governs flexible withdrawal of benefits, while the second set will give details on how the DB schemes will be adjusted.
The first set of proposals laid out the legal changes needed to allow DB schemes to offer flexible withdrawal.
In its white paper, the commission pointed out that DB schemes need to have a calculation-related cut-off point stipulated for when the premium reserve for an individual employee is to be fully built up - so as to cover the benefits of the scheme.
The commission has proposed introducing the term 'earning age' into the Defined Benefit
Pensions Act, to create a pensionable age in advance for the calculation purposes, and that this age should be stipulated in a particular scheme's regulation, and may be 67 or older.
Apart from this, the current rules for calculating the premium and earned pension will remain as they are.
Despite the time pressure, Storebrand fully supports the new legislation.
Risebrobakken said: "We are quite pleased with the proposal, and it's right to introduce flexibility into pensions."
Other changes will follow in the wake of the introduction of the new laws in January 2011, he said.
"There will be a lot of changes, and we expect to see new proposals for hybrid schemes," he said.
At the moment, Norway's providers only offer pure DB or pure defined contribution, with no graded levels of risk-sharing between employer and employee in between, he added.