The Pension Committee proposes changes to the current pension system
In 2020, the Solberg government appointed a committee with a mandate to evaluate whether the long-term goals of the pension reform can be achieved and to propose possible adjustments to the current rules to ensure the pension system's economic and social sustainability. The committee is led by Kristin Skogen Lund, has 12 members, and is composed of politicians, leaders, union representatives and economic experts.
The committee today presented its report to the Ministry of Labor and Social Inclusion. The committee's main conclusion is that the pension reform has been successful in the sense that it eases the pressure on central government finances in the long run, but that adjustments should be made to ensure social sustainability.
The main features of the committee's conclusions and proposals are as follows:
- As the outlook is now, the committee believes that there is no need for major tightening or system changes to ensure the financial sustainability of the pension system.
- The committee believes that adjustments are needed to ensure the social sustainability of the pension system.
- The three key proposals for ensuring the social sustainability of the pension system are:
- The age limits for the earliest and latest withdrawal of old-age pension should be increased in line with the development of life expectancy, and a "standardized retirement age" should be introduced.
- The minimum benefits in the pension system (the «minimum pension») should follow the general development of wealth.
- Receivers of disability benefits should be guaranteed a reasonable old-age pension.
The part of the proposal that will affect broad sections of the population and that will create the most debate, is probably the proposal to change the age limit for when we can start drawing an old-age pension at the earliest. For employees without special age limits, this is today at the age of 62.
A basic principle in the pension reform is that because we live longer, we must work longer to earn a reasonable pension. In the committee's view, the current 62-year limit for drawing an old-age pension is not compatible with this. People who retire or start drawing a retirement pension without leaving working life "too soon" will receive a poor pension. The committee will in other words "force" us to work longer for our own good.
The committee proposes to introduce the term «standardized retirement age», which will be the age at which the various age groups must work to receive a normal pension. The standard retirement age will increase in line with the changes in life expectancy for the various cohorts. For the increase in pension earnings to compensate for the increase in life expectancy, this means that the standard retirement age increases by 2/3 of the increase in life expectancy.
The changes in the standardized retirement age will again govern the changes in the age limit for the earliest and latest withdrawal of old-age pension. In order to make up for the backlog, however, the committee believes that the increase in the age limit for the earliest withdrawal should take place faster than the increase in the age limit for the latest withdrawal. In practice, this means that i.e., that a person born in the 1990s will have a «standardized retirement age» of something more than 70 years and an age limit for withdrawal at the earliest of something more than 65 years.
The Pensions Committee's report will probably only be one of several voices in a political debate that has already begun, and which will probably increase in intensity over the autumn. Adjustments and reversals of parts of the current regulations are a political issue for large employee organizations and for parts of the political left. In particular, there is a call for a scheme for the so-called "hard workers" in working life.
The working life organizations have appointed a separate committee that will submit its report over the summer. In other words, pensions are emerging as a major political issue where changes must be expected.
