The Norwegian financial sector lobby group Finance Norway (Finans Norge) has criticised the country’s new government for sharply reducing the amount individuals can put into the IPS tax-favoured private pension vehicle.
In its revised 2022 budget this week, the government of Prime Minister Jonas Gahr Støre – which took office in the middle of October – included a reduction in the annual maximum tax deduction for IPS contributions to NOK15,000 next year from NOK40,000 in 2021.
Tom Staavi, director of information at Finance Norway, said: “Setting the maximum rate at NOK15,000 destroys the opportunity for very many people with a poor occupational pension to save a reasonable pension.”
The association said the Støre government was breaking with the pension reform and destroying the IPS scheme.
“It deprives everyone who is not lucky enough to have a good collective scheme through work an opportunity to save up a sensible pension,” Finance Norway said in a statement on the issue.
It said that an important premise for the reform of Norway’s national insurance scheme (folketrygden) and the changes in occupational pensions was that there should be a third pillar – namely an individual pension savings scheme.
“This is a promise made by politicians to implement tough measures to make national insurance sustainable. IPS is a mildly tax-favoured scheme that Norwegian pension savers have agreed to,” the lobby group said.
Staavi also said that in contrast to housing – the assets most Norwegians used as savings – the money in IPS accounts financed new value creation and jobs in Norway.
“The Norwegian economy will undergo a restructuring, which will require large amounts of risk capita. Pension resources that are tied up for a long time, managed by solid and long-term managers, are perfect for that purpose,” he went on to argue.
A new IPS vehicle was introduced in 2017, replacing the former IPS scheme which closed for subscriptions at that point.
While the former IPS allowed a tax deduction for an annual deposit of NOK15,000, the new scheme had an upper limit for deductible savings of NOK40,000.