NORWAY - Major pensions reforms are on the cards in Norway with the Pension Commission recommending sweeping changes to the existing system and proposing raising the retirement age to 70 years.
The commission, which submitted its report - Modernising the National Insurance Scheme, Sustainable Pension for the Future - has put forward new rules for adjusting pension payments whereby future payments will be linked to the mean of the wage rise and inflation, instead of the current system based only on wage growth.
Headed by the former finance minister Sigbjoern Johnsen (pictured), the commission was established to outline a new framework for a future pension system in the context of an ageing population and an increasing tendency for early retirement.
“At present, only just over half of men in the 60 – 66 year age group are still working. If one includes those receiving disability pensions within all age groups, as well as agreement-based early retirement (AFP scheme), the expected retirement age in Norway is about 61 years, i.e. 6 years less than the formal retirement age of the National Insurance Scheme. How to ensure high and increasing employment amongst the elderly, has been one of the core issues addressed by the Pension Commission,” the commission said in its report.
Introducing the life expectancy adjustment ratio for a more robust National Insurance Scheme, the commission issued a grim warning to those who leave work at 62 stating that “it will be without any financial contribution from the Government”.
“The longer one remains working, the higher the annual amount of pension will be and vice versa. The underlying principle is that each individual shall meet the main cost of choosing to take early retirement.
“The Commission proposes that the Government's financial contribution to early retirement schemes to be concentrated on the National Insurance Scheme. This implies that if the industrial partners decide to continue the AFP scheme, it will be without any financial contribution from the Government. The upper age limit of 70 years for continuing to accrue additional pension entitlements under the National Insurance Scheme should be increased over time, as life expectancy increases,” the commission added.
The new system is expected to come into force from 2010, provided parliament agrees with the recommendations when it is debated in the autumn session.
Those born after 1965 will be affected by the new reform while those born before 1950 will fall outside its scope. Norwegians born during 1951-1964 will receive their pension from a combination of the old and the new system.
The commission has also recommended that pension be related to overall lifetime income with everyone guaranteed a pension no lower than the current minimum public pension from the National Insurance Scheme.
This week's top stories include ITS' management buyout from Mercer, and The Pensions Regulator launching a probe into single-employer defined contribution schemes' default funds.
People retiring in the UK will on average outlive their pension savings by 10 years, according to research by the World Economic Forum (WEF).
Steps to improve auto-enrolment are uncontroversial and obvious, but the government is dawdling on introducing the necessary changes, argues Jack Jones.
Professional trustees will be expected to apply for accreditation as part of a framework intended to be launched on 1 July by the Professional Trustee Standards Working Group (PTSWG).