EUROPE – The Norwegian government is keeping the maximum interest rate life insurers and pension funds can use to calculate premiums and provisions at 2.5%, rejecting advice from the financial regulator to cut it to 2%.
The Ministry of Finance said it was overruling the regulator Finanstilynet's proposal because such a change could have interfered with the upcoming transition in occupational pensions to defined contribution from defined benefit.
It said: "There is great uncertainty about the extent to which premium increases as a result of a possible reduction of the maximum guaranteed interest rate will strengthen the transition from defined benefit pension schemes to defined contribution pension plans."
With such a significant change to pension rules pending in Norway, the ministry said it believed altering the maximum interest rate could be damaging.
The Banking Law Commission has put forward a new draft law on pensions in Norway.
It contains a new framework for occupational pensions, with the existing defined benefit plan regime being replaced.
It aims to bring occupational pensions into line with the new state pension, which is seen as a necessary move since in Norway the two are linked, with a typical defined benefit scheme targeting a certain level of final pay including the state pension.
The Ministry of Finance said it aimed for legislative work on the new pension product and transition rules to be clarified in the course of 2014.
"On this basis," it said, "the Ministry of Finance has concluded that the maximum guaranteed interest rate will not change with effect from 1 January 2014."
Finanstilsynet had justified the proposed rate cut by saying that, in periods where interest rates and therefore potential returns were falling, future payments from pension schemes had to be increasingly secured from contributions rather than investment returns.
"Although the direct effect of a reduced computational rate of pension schemes' solvency in the short term is limited, increased premium payments increase security for future pension payments by developing technical provisions," it said.
Meanwhile, Denmark's Danica Pension has won a new five-year contact to provide occupational pensions for 5,500 office workers at shipping conglomerate AP Møller-Mærsk.
The contract had been put out to tender, with several large pension companies and labour-market pension funds competing for the deal, said Danica Pension, the pensions arm of Danske Bank.
Jesper Winkelmann, Danica Pension director, said: "We are very pleased our long relationship with AP Møller-Mærsk will continue in the next phase."
The bidding process had been good, he said, with many big demands being made of the future pension provider.
"This was the case concerning both the product package and the advice elements," he said.
The new contract takes effect on 1 January 2014, runs for five years and is a continuation of the relationship between AP Møller and Danica Pension, which has been going since 2003.
AP Møller-Mærsk's director of accounting Jesper Cramon said the company was pleased with the deal, which included significantly improved conditions for its employees.
"Danica Pension has listened to our wishes about focusing on low administrative cots, high returns, attractive healthcare solutions and, not least, a good and effective advice service for our members within the agreement, irrespective of where they are in the world," he said.
Danica Pension said the deal meant that, in future, it would be offering a range of new online advice services accessible for all of its customers, not just the AP Møller-Mærsk staff.