Some rather radical changes have taken place lately within the pension legislation in the private sector. A completely new act on occupational pension schemes – Act of Defined Benefit Schemes – allowing deductible contributions has been passed. This act replaces earlier regulations of defined benefit schemes pursuant to the Taxation Act. So far, defined contribution schemes have not gained ground of any significance in Norway due to the fact that no deductible contributions have been allowed for this type of pension schemes.
A completely new Act of Defined Contribution Schemes has also been passed and makes defined contribution schemes a real alternative to our traditional occupational pension schemes (defined benefit schemes). It remains to be seen if this will arouse interest in establishing defined contribution pension funds.
Besides we have also accomplished a value added tax (Vat) reform introducing Vat on services. It is not yet clear to what extent the Vat reform will affect pension funds.

The Act for Defined Benefit Schemes
The Act for Defined Benefit Schemes was implemented on 1 January 2001, comprehensive intermediate regulations have been given. The principal rule being that pension funds and insurance companies have to adapt their pension schemes to the Act by 31 December 2002. However, some single fields have been granted much longer period than two years.
The Supervisory Board of Finance and Insurance is preparing new standard by-laws for private pension funds. Within about one year the pension funds have to adapt their by-laws to the standard. These by-laws must be sent to the Supervisory Board of Finance and Insurance accompanied by a declaration from an attorney and an actuary confirming that the by-laws are in accordance with the standard and the remaining legislation.
The Act for Defined Benefit Schemes introduces a requirement that both in insurance pension schemes and in pension funds including 15 or more members there must be established a “steering group” with three persons appointed among the members of the pension scheme. The group has to to give a statement in cases concerning the management and performance of the pension scheme.
According to the new legislation pre-pensioners, ie, employees retiring before they reach 67 years, have to be reported as having resigned from the pension scheme. The pre-pensioners do not normally have access to maintain their membership in the pension scheme, though some exceptions have been made for a few groups of employees.
According to the new legislation the funding of the scheme is to be based on a principle of linear accumulation. The intermediate rules for adaptation have already caused great problems of interpretation.
The act makes no demand that the benefits last for one’s lifetime. The old age pension can be reduced or cease 10 years or later from its start date if so stipulated by mutual contract.
The act gives access to the company in some extension to receive the premium fund amounts in return, which solves the problem of over-financed pension schemes.
Completely new regulations have been implemented for regulation of current pensions. The surplus of the pensioners’ premium reserve fund is to be used to regulate the current pensions. The maximum regulation carried out in accordance with the base amount (G) of the National Insurance Benefits.

The Act for Defined Contribution Schemes
The Act for Defined Contribution Schemes was implemented on 1 January 2001 and with this – for the first time in Norway – it has opened access to deduction from income of the contributions to defined contribution schemes.
Pension schemes of this type can be established either by an insurance company, as an independent pension fund, by a bank or by a management company for funds of securities.
Likewise in defined benefit schemes a steering group must be established with representatives among the members of the pension scheme if the scheme includes 15 or more employees.
The contribution plan is determined by the company and the government has been given the authority to determine the limits for contributions entitled to income deduction.
The lowest allowed retirement age is 67 years, both within the defined benefit and the defined contribution schemes. There are some special age limits for extremely strenuous occupations. Pensions (old age pensions) from defined contribution schemes shall be paid out for minimum 10 years.

Value added tax on services
Vat on services was implemented on 1 July 2001 in Norway. As in other EU countries the exceptions are services delivered by finance and insurance. This means that the pension funds wil not calculate Vat on the services they deliver.
Vat on services creates special problems for pension funds, which in Norway have only built up their own administrations to a very small extent. Most of the Norwegian pension funds therefore buy in very large scale services with Vat and this might bring disadvantages in meeting the competition from life insurance companies, which have their own administrations including administrative, legal and actuarial services.
There are already doubts about how the Vat regulation is to be implemented with pension funds. The Ministry of Finance has announced that pension funds have to pay Vat on required actuarial services, which the pension funds buy. However, doubts have been raised about whether this interpretation of the act is correct. In this connection it has been referred to the practice in other European countries.
Pension funds have made a proposal stating that the Vat on services they buy to be deducted from the company’s Vat account. It is also proposed that Vat should not be calculated on the services delivered to the pension fund by the company having its scheme in the same pension fund.

Topics