Proposal for new public occupational pension scheme in Norway

The Ministry of Labour and Social Affairs presented its proposal for a new public occupational pension scheme yesterday (Prop. 87 L 2018-2019). The proposal is based on the agreement that was reached after negotiations between the parties in the working life in the spring of 2018, and entails (with some exceptions and transitional rules) that new rules concerning earning of retirement pension apply to all employees in the public sector from 1 January 2020.

The new public occupational pension scheme is a supplementary arrangement, which means that the pension is a supplement to the retirement pension under the National Insurance Scheme. In other words, the pension will no longer be a “gross pension” which includes pension under the National Insurance Scheme, as under the current rules. In the contribution period, the pension scheme has many common features with a defined contribution pension scheme: The employer puts aside (or pays to the pension scheme) a percentage of the employee’s salary annually to future payments of retirement pension. When the employee starts taking out the pension, the accrued amount is converted to a life-long pension benefit. The employee can start taking out the pension from the age of 62, i.e. as under the National Insurance Scheme and occupational pension schemes in the private sector.

The new public occupational pension scheme is the latest step in the Norwegian pension reform which has previously led to significant changes in the Norwegian National Insurance Act and the rules concerning occupational pension in the private sector. The new public occupational pension scheme implements all the key considerations behind the pension reform; including the principle of earning of pension in all working years, life expectancy adjustments and flexible and neutral taking out of the pension. The new rules concerning public occupational pension scheme further presupposes that the rules regarding new contractual early retirement pension scheme (AFP) in the public sector will be amended and become a lifelong supplementary pension scheme similar to the contractual retirement pension scheme (AFP) in the private sector.

The new rules will come into effect on 1 January 2020. However, several transition arrangements will apply. For employees with a special retirement age, particular adjustments and particular schemes must be made. The parties in the working life will negotiate this during the spring/fall of 2019.