OECD backs Norwegian pension fund proposal
NORWAY – The OECD has recommended that Norway implement reforms such as the creation of a new public pension fund based on the Petroleum Fund and the National Insurance Fund.
The Organisation for Economic Cooperation and Development said it recommended the implementation of the ad hoc pension committee’s proposals that were published in January.
The proposed new fund would have a stronger emphasis on the relationship the fund and pension liabilities, the OECD said in a 191-page report. “It is important that if the new pension fund is adopted, revenues should be invested in line with the guidelines for the present Petroleum Fund,” it added.
“The Petroleum Fund cannot negate the need for serious reforms to the pension system,” the report said. Even if all of Norway’s oil revenues under fiscal guidelines were earmarked for pensions, “this would be insufficient to cover the financing gap even today, let alone in 10 years when pension spending really starts to accelerate”.
Scrapping the fiscal guide and using the Petroleum Fund to pay for the increase in unreformed pensions would “completely exhaust” the fund by the mid-2020s, the report stated.
The commission’s goal was to cut pension spending by three to four percent of gross domestic product. Its ideas aim at making the system stronger by “stressing proportionality and actuarially neutral principles”, the OECD said.
“The bottom line is that as in many other countries, the current design has turned out to be too generous faced with the demographic development,” the Paris-based organisation said.
It added that the proposals did not go far enough in terms of eliminating the wage component of pension indexation.
In addition to a new pension fund, there are five other proposals. They include: the actuarial adjustment of benefits to allow retirement between 62-70, using all working years in the calculation of pension entitlements, adjusting pension entitlements for all cohorts if life expectancy rises, indexing benefits to prices and wages and the withdrawal of the early retirement scheme.
Last week the Petroleum Fund announced it returned 12.6% in 2003.