NORWAY - The International Monetary Fund (IMF) has warned Norway must tackle the very high inflow into sickness and disability benefit schemes if the pension reforms implemented in 2010-11 are to be effective.

In an IMF Staff Report on Norway, the organisation said despite the strong state of Norway's public finances the fiscal costs of ageing are expected to produce a "sizeable financing gap" over the longer-term.

This gap is estimated to be worth around 6% of mainland GDP by 2060, even after the successful implementation in 2010-11 of reforms which are designed to "encourage longer working lives and limit the rise in pension outlays by tying benefit levels to demographic developments". (See earlier IPE article: Norway targets ageing via an active workforce)

The IMF noted, however, that the effectiveness of these reforms in reducing pension costs "risks being undercut by the large, and rising, inflows into sickness and disability benefit schemes, which have become a major pathway to early retirement". In particular, the IMF noted the share of Norway's workforce receiving these benefits is the highest in all OECD countries. 
The IMF concluded that while the reforms are appropriate to encouraging people to work longer, "it will need to be supplemented by concrete steps to curb the very high inflows into sickness and disability benefit schemes".

"Measures have to be geared towards improving the incentives of employees and employers, in both the private and public sector, and could include greater use of cost-sharing and increased reliance on specialised social insurance physicians in assessing and verifying eligibility," the report stated.

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