NORWAY - Defined benefit (DB) occupational pension structures in Norway will be allowed to operate in accordance with existing rules beyond 1 January 2011 when the new legislation for the state old-age pension comes into force.
Norway’s Banklovkommisjon, the Banking Law Commission, has handed in the first of a two-part report on the necessary law changes governing private pension provision to the ministry of finance.
However, because of the complex changes needed to adapt the DB occupational pension structures in accordance to the laws in the new reformed state system, the commission suggests these types of pensions should be able to operate according to current legislation after next year and until at least June 2011. At which point the commission would have assessed how to best adapt DB and insurance-based schemes to the laws governing Folketrygdet, the country’s national insurance pensions.
According to the commission, the complexity of the occupational DB schemes, as compared to defined contribution (DC) plans, arises because of the design of the pension plans, how the premiums are calculated and the close connection of the benefits to the calculation of the public pension.
Meanwhile, a transitional arrangement that involves an adaptation to flexible access to old-age pension assets, but with no change to the current calculation rules, has been proposed.
Other DB pension structures will also have to adapt to the new legislation but this will only require smaller technical adjustments and updating of the law governing them, according to the commission.
From the beginning of next year, Norway will scrap the fixed retirement age of 67 and move to a more flexible drawing of old-age pension introduced for the public national insurance system. In the state system, entitlement to pension will start at the age of 62, but can be postponed to age 75, with the opportunity to withdraw pension at the same time as the individual continues to work but also continues to accrue pension assets.
The commission has proposed amendments to the pension laws governing DC and DB which means that a similar level of flexibility is introduced for employees.
Sigbjørn Johnsen, minister of finance, said it is important to make the changes to the law for private collective pensions arrangements so that they are harmonised with the increased flexibility that will be available through the reform of the national insurance pension system.
The ministry of finance has sent the commission’s proposals out for consultation, and expects to have a law proposal ready during the autumn of 2010 so that the changes can come into force on 1 January 2010.
The old-age pension obligations under Folketrygdet, the National Insurance Scheme, will be an estimated NOK4.77trn (€611.3bn) at the end of 2010. The Government Pension Fund Global was set up in 2006 to finance the pension obligations, and other long-term considerations in spending of the country’s oil revenues. The fund’s total assets are estimated to be NOK3.1trn at the end of 2010, an increase from NOK2.76trn at the end of 2009, because of market appreciation and government transfers.