NORWAY - The NOK1183bn Petroleum Fund would merge with the National Insurance Scheme fund to create the ‘government pension fund' under a proposal touted by the Ministry of Finance.
The government today submitted a legislative proposition to establish the government pension fund, flagging its intention that the size of the fund and future allocations not be directly related to government pension obligations under the National Insurance Scheme.
“In the proposition I have emphasised that the accumulation of financial assets that today takes place in the petroleum fund and the national insurance scheme fund shall not be impaired,” said minister of finance Per-Kristian Foss.
A separate administrative board or administration will not be established for the pension fund, he added.
In future, said Foss, the fiscal rule for the use of petroleum revenues would be the operative guideline for fiscal policy. The aim is for a long-term, steady and sound phasing in of petroleum revenues into the Norwegian economy in line with the expected return of the Petroleum Fund, corresponding to the part of the Pension Fund that is invested internationally, he added.
The legislative proposition is based on the Pension Reform - Safeguarding Our Pensions report, which the Ministry of Finance said “a broad majority” of the Storting supported.
After the pension fund is established the Ministry of Finance will give a broader discussion of the capital of the fund, in relation to the developments in government pension obligations under the National Insurance Scheme. This will serve as a supplement to other indicators of the sustainability of government finances in the annual budget documents.
In its fiscal budget for 2006, the Ministry said even if oil prices are sustained at a high level, there will still be long-term budget challenges due to the future increases in pension costs in the National Insurance Scheme, hence the need for pension reform to secure fiscal sustainability.
The Norwegian National Insurance Scheme will remain a pay-as-go system and integrated in the central government budget.
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