New legislation coming into force in Norway concerning mandatory pension plans.

N O R W A Y

MANDATORY  CORPORATE  PENSION  PLANS


A bill has this autumn been presented to the Parliament, in which it is proposed that all employers are required to have a minimum pension plan for their employees. The employers’ contribution shall as a minimum be 2 per cent of the salary up to appr. NOK 720.000 (USD 107.000, EUR 91.000).

Instead of a pension plan based on an annual contribution from the employer, the employer may chose a plan where the employees are secured a certain payment of the same level as a contribution based plan as a whole.

The Act comes into force on January 1, 2006, with a requirement for the employers to start making their contributions from July 1, 2006. As a consequence, the insurance industry is at the moment busy working out pension plans to offer to their customers, as having a life company to administer such plans is the most common way of doing it in Norway.

It is expected that the Act will have quite significant consequences for smaller entities, in which the existing of pension plans are not very common. One reason for this is that the pension rights under the social security system traditionally have been on a relatively high level. Due to longer life expectancy and a gradually earlier pension age, the need for a change in the social security system in combination with additional private pension plans has increased also in Norway. This has resulted in a need for modernizing the pension system, and one spin-off of this is a mandatory minimum pension system in combination with changes that encourage people to remain in employment longer.