Tromsø regional council in the north of Norway has set up its own local authority pension fund for staff, completing a move sparked by pensions provider DNB’s decision to withdraw from the public sector pensions market.

Both administration and asset management have been outsourced to financial services group Storebrand.

With 5,000 members and assets under management of NOK2.5bn (€304m), the council said the new Tromsø Municipal Pension Fund, officially established on 1 October, would become one of the biggest independent local authority pension funds in the country.

Around 20 local authorities in Norway currently have their own pension funds.

Anne Berit Figenschau­, Tromsø councillor for finance, said: “We are establishing our own pension fund because it is economically advantageous for Tromsø Council.”

The cost of administration will fall, she said, and with an active personnel policy and focused HSE (heath, safety and environment) work, the local authority will be able to reduce the annual pension contributions.

Another advantage of going it alone is that the pension fund board will have a greater influence over the way fund assets are managed, the council said.

It said it began working on setting up its own pension fund four years ago.

Tromsø had been a customer of DNB Livsforsikring since 1947, but the life insurer is now no longer providing this service.

As a result, the council said it then had a choice between doing it itself or finding a new provider.

Trond Eliassen, project manager, said there would be no consequences for the staff pension, since it followed tariffs and statutory rights.

“There are strict rules for the management of pension funds,” he said.

The new Tromsø Municipal Pension Fund will cover all council employees, pensioners and former employees who are members of the main pension scheme. 

The exceptions are teachers and educators affiliated with the state pension fund, as well as doctors and nurses belonging to KLP’s pension scheme.

Administration of the scheme has been outsourced to Storebrand Pension Services, and investment management to Storebrand Asset Management.

A seven-person board has been appointed, Tromsø said, but a general manager for the pension fund has yet to be hired.

It said Peter Lunde of Storebrand Pension Services would fulfil this role in the meantime.

DNB Livsforsiking has said it decided to leave the public service pensions business because of ever-tighter requirements and regulations, as well as intense competition in the market.

Storebrand is also leaving direct provision of public service pensions due to the high level of investment in systems and processes that would have been required to continue with the work.

Kommunal Landspensjonskasse (KLP), the second-largest provider of public service pensions in Norway after Statens Pensjonskasse (SPK), is taking on much of the business left by DNB and Storebrand.

It has said it is taking in 150,000 new members as a result of the corporate exits by the end of 2014.

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