NORWAY - Radical changes to laws governing defined benefit plans in Norway will be needed to adapt the schemes to the new old-age state pension, a commission tasked with examining the future of pensions in the country's private sector has concluded.
In a report presented to the Government this week, the Banking Law Commission said that adapting DB plans will be much more complicated than defined contribution and individual pension schemes.
This is due to the design of the pension plans, the premium calculation and the close connection of the benefits to the calculation of the public pension, the commission reported.
From January 1, 2011, the fixed retirement age of 67 will be scrapped and a more flexible drawing of old-age pension introduced for the Government's public National Insurance system.
Pension entitlement will begin at age 62, but can also be postponed to age 75, with the opportunity to withdraw pension at the same time as one remains in work and accrues pension entitlement.
The commission has proposed amendments to the pension acts governing DC and DB that mean that a similar level of flexibility is introduced for employees.
But it said the nature of DB pension calculations means that it will be "very difficult" for them to continue to operate under their existing structure because of the close ties between the calculation of pension premiums and the fixed retirement age of the first pillar system.
"The adaptation of DB and insurance-based service pension schemes to the new National Insurance scheme demands consideration that goes further than a pure statutory adaptation to the new provisions of the National Insurance scheme," the report said.
The Banking Law Commission said that a number of alternatives for defined-benefits and insurance-based schemes, in which elements of existing structures are "included to a greater or lesser degree", will have to be considered.
In the meantime, a transitional arrangement that involves an adaptation to flexible drawing of old-age pension, but with no change to current calculation rules, has been proposed.
It is thought the amendments will be presented to Norway's parliament - the Storting - in the autumn.
If approved as expected, sponsors will have until 1 June next year to introduce the new rules.
Separately, Norway's public pension fund reported a 3.9% return on its investments in the first three months of 2010, beating its benchmark portfolio by 0.4%.
Norges Bank Investment Management, which manages Norway's Government Pension Fund Global - also known as the oil fund - , said the global stock market rally and an improvement in bond prices helped to add NOK103bn (US$16.49bn) to its market cap of NOK2.8trn.
Following a mandate to invest in real estate earlier this year, NBIM said that it would from now on allocate 5% to international commercial property, marginally reducing its equity exposure to do so.
The pension fund manager also announced plans to open an office in Singapore, suggesting that the oil fund, which had 10% of its assets in Asian markets at the end of 2009, could be looking to increase that exposure in the future.
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