Norwegian pension fund KLP saw an influx of 150 corporate and 16 local authority pension scheme transfers in the third quarter of this year following the withdrawal of major providers from the public sector pensions market.
In interim results, the public service pensions giant said the transfers, which took place between July and September, represented NOK10.4bn (€1.2bn) of funds, and brought the total new membership inflow this year to 132,000 individuals.
The transfers are a continuing effect of the decisions by Storebrand and DnB Livsforsikring to withdraw from the public occupational pensions market, leaving KLP as the only provider in the sector.
However, Norwegian public bodies also have the option of setting up their own pension funds for staff.
In June, KLP predicted its membership would grow by a total of 150,000 in 2014.
It said that, of the 18 municipalities that still have their pension scheme with other providers, 16 of these had asked KLP to make them an offer with a view to transferring on 1 January 2015.
Sverre Thornes, chief executive, said: “This migration represents one of the biggest ever influxes of new members to KLP’s pension schemes.”
He said the company was responding to the changed market situation with continued focus on value creation through good returns, low costs and good service.
KLP reported an overall return from January to September of 4.9% but said equities made almost nothing in the last three months of the period.
Over the whole of the nine months, equities, short-term bonds and property were the primary contributors to the positive return.
Total assets grew to NOK470bn from NOK399bn at the end of December.
The nine-month return compares with 4.5% in the same period last year.
Meanwhile, the Norwegian Financial Supervisory Authority (Finanstilsynet) warned that Norwegian pension funds and life insurers faced major challenges in the next few years, despite making strong returns so far this year.
In its 2014 financial trends report, the supervisor said rising stock prices and capital gains on bonds had brought good results for pension institutions so far this year.
“However,” it added, “the institutions face major challenges in coming years.”
Low interest rates are making it difficult for them to secure a return above the guaranteed minimum rate, it said.
“Although the volume of defined contribution pensions is rapidly growing, the bulk of life insurers’ liabilities still consists of contracts providing a guaranteed annual return,” the report went on.
Other problems facing the sector are low interest rates, the effects of Solvency II regulation and rising longevity, it said.
When Solvency II takes effect in the EU on 1 January 2016, it will bring substantially higher capital charges for a number of life insurers, Finanstilsynet said.
“The latter must either reduce risk or increase their capital to meet the new requirements,” it said.
Noting that the directive amending Solvency II – Omnibus II – allowed some relaxation of the requirements because of the difficulties facing many life insurers, the Norwegian supervisor indicated it would take advantage of this leeway.
“Finanstilsynet has recommended applying some of these relaxations to Norwegian life insurers to give them more time to adapt to the new capital requirements,” it said.