NORWAY - Norwegian pension providers are gearing up for a market boost with the introduction of mandatory employer contributions to privately managed employee pension funds.
The new pension requirement, which comes into force in July 2006, has been set at a relatively low 2% of gross pay – “not the richest scheme in the world”, according to Nils Robert Hodnesdal, a spokesman for insurance firm Storebrand.
Although the employer contribution has been set low enough to avoid penalising smaller companies, it adds up to a predicted annual premiums of NOK3-3.5bn (€372-435m). Currently, only around 50% of private-sector employees are covered.
The bulk of the business will likely to go to providers already active in the market, according to Hodnesdal, although he also expects large players would use strong brands and extensive customer databases to enter the market.
Meanwhile, Norwegian employers are nervously eyeing their own pension provision before the regulation takes effect. Most nervous of all are employers in the hotel and restaurant industry, which has one of the lowest levels of pension coverage of any sector.
Olaf Majnussen, a former director of employers’ organization NHO and now a special adviser to the organization, said the body didn’t know how many of its members already contributed to employees’ pensions.
The NHO had argued that pensions should remain an issue for local negotiation. Now it is considering setting up a centralised purchasing scheme that will allow companies to outsource the pensions of around 100,000 employees.
“Most companies are not interested in pensions,” said Majnussen. “They want to get rid of the burden and adopt the simplest possible administration. We don’t have a specific provider in mind, but the one we choose will be a large one with intimate experience of pension provision.”
In future, pension provision is likely to grow as a part of salary negotiations. Trade unions have long campaigned for equal contributions from employers and employees, which would increase the value of the Norwegian pensions market for providers. But it would also entail greater involvement for trades unions in decision-making – an outcome many companies would not welcome.
Eystein Gjelsvik, deputy head of economic and social affairs at the Norwegian trade union confederation, dismissed suggestions that Norway could become a test case for pensions regulators in other European countries. “Other countries are starting with better schemes that us,” he said. Until 2001, Norway had only one, administratively burdensome scheme – and that only for large companies.