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a pyramide representing the norwegian pension system

Pension

Pension is an important part of your employment terms.
Everyone collects pension benefits in the National Insurance Plan; in addition, you collect an employer-based pension from every place you’ve worked throughout your life.
Your employers’ pension contributions provide you with a basis for living well after reaching a point in life when you want to work less; they also help you if you become disabled and/or want to leave money to others if you pass away.

Everything you want to know about pensions

The National Insurance Plan’s old-age pension

Everyone who works in Norway is entitled to collect an old-age pension (also called retirement pension) from the National Insurance Plan (Folketrygden). A recent pension reform introduced new rules for people born in/after 1963; if you were born before 1963, you’re also covered by the old pension rules.

Born in/after 1963

If you were born in/after 1963, you earn pension benefits based on 18.1% of your salary up to 7.1 times the basic amount G. Each year you work and earn an income between the ages of 13 and 75 counts toward building your pension savings and portfolio.

You can make flexible withdrawals from your old-age pension account between ages 62 and 75 provided you have enough savings in it to do so.

  • You can choose to make a complete withdrawal of your old-age pension; alternately you can make gradual withdrawals of 20, 40, 50, 60 or 80%.
  • You can freely combine working and collecting your pension without any reduction of your pension amount.
  • Your old-age pension will be adjusted for life expectancy; in other words, it’ll be adjusted in accordance with the life expectancy of the general population.

Born before 1963

If you were born between 1954 and 1962, your pension calculations follow both the old and new rules (1962: 10% old rules; 1962: 20% old rules…1954: 90% old rules).

If you were born in 1953 or before, the old rules apply to you in their entirety.

Old rules

According to the old pension rules, your pension portfolio is expressed in “pension points.”

Your pension amount is calculated using the 20 years of highest income earnings.

Employer-based pension – what your job saves for you

An employer-based pension, or the portion of your pension your employer saves for you, provides old and new plans for the public sector and three different pension types for the private sector.

If you work in state/municipal government, a healthcare organization or a company affiliated with the government, you automatically become a member of a public sector pension plan. This plan has recently been revised; as a result, there is now an old plan that you fall under if you were born before 1963.

As regards the private sector, there are three types of employer-based pension plans: 1) a defined contribution pension plan, 2) a defined benefit pension plan, and 3) a hybrid pension plan (which is becoming more widely used).

In addition to the plan you have through your current/most recent employer, you can have several contributions made from former employers in both the public and private sectors.

There are three types of employer-based pension plans in the private sector:
1) a defined contribution pension plan,
2) a defined benefit pension plan, and
3) a hybrid pension plan (introduced on 1 January 2014).

Defined benefit pension plans are “traditional” plans that aim to provide employees with a supplement to the National Insurance Plan’s retirement pension by providing a certain portion of an employee’s final salary (usually 66%).

In earlier defined contribution pension plans, it wasn’t the particular pension the plan provided that was defined; rather, it was the annual contribution made by the employer that was defined.

In current defined contribution pension plans, the employer makes a regular contribution payment as a percentage of their employee’s annual salary. The maximum amount an employer may set aside is 7% of salary between 0 and 12 G. For salaries between 7.1 G and 12 G, an employer can make an additional contribution payment of 18.1% of salary. Currently, several employers are for various reasons transitioning to defined contribution pension plans.

Legislation has set a maximum amount on contributions at 7% of salary between 0 and 7.1 G and the possibility for an additional contribution of 18.1% of salaries between 7.1 and 12 G (in other words a total amount of up to 25.1% of salary). In short these additional contributions for salaries between 7.1 G and 12 G provide employees with a greater opportunity to compensate for a lack of pension-related earnings in the National Insurance Act for salaries over 7.1 G.

In defined contribution pension plans, it’s now possible for employers to make contributions from the moment an employee starts earning a salary; this includes hybrid pension plans as well.

Beyond having to provide a modest minimum level of benefits (a result of legislation on mandatory employer-based pensions), most employers in the private sector have the right to decide for themselves what their employer-based pension plans will provide for their employees.

This is why Tekna encourages both recent graduates and all others who are considering switching to a new job to study the pension plan provided by a potential new employer very carefully before accepting a new job offer.

Important legislation: /in Norwegian)

If you work in state/municipal government, a healthcare organization or a company affiliated with the government, you automatically become a member of a public sector pension plan. This plan includes pension, disability and survivor’s pensions.

New public sector pension plan for employees born after 1963

The plan was introduced in 2020 for state/municipal/healthcare employees who were born in/after 1963. People who are covered by the new rules yet have savings accrued under the old plan can keep all of their pension savings accrued under it.

What’s new: It pays to work a long time

The public sector’s moving from offering a defined benefit pension – which paid 66% of an employee’s final salary before life expectancy rate adjustments – to a so-called “surcharge pension” (also called a retirement pension). Using this model, you accrue pension savings for every year you work, and there’s no longer any maximum amount you can collect from your total pension. In other words, it pays to work longer. The new plan makes a public service pension more like the National Insurance Plan and employer-based private sector pension plans. It provides lifelong payments and equal pension amounts for women and men who’ve worked at the same salary levels throughout their careers.

What are the main features of the new plan?

  • You receive annual pension earnings of 5.7% of your income between 0 and 12 G (the basic amount G is updated on 1 May every year).
  • You also receive pension earnings on income between 7.1 G and 12 G at 18.1%.
  • Every year of working up to age 75 awards pension earnings.
  • Your pension is calculated separately from the National Insurance Plan.
  • Your pension may be freely withdrawn between the ages of 62 and 75 and combined with working without any reduction made to your pension amount.
  • A new contractual early retirement plan (AFP) has been introduced that follows the private sector’s plan. This comes in addition to employer-based pensions and the National Insurance Plan; AFP awards pension earnings between the ages of 13 and 61, and withdrawal of AFP may be combined with working.
  • Anyone who doesn’t qualify for the new AFP plan will receive a defined benefit plan.

Public sector pension plans for people born in/before 1962

This group remains under the old plan, meaning that you can retire with a contractual early retirement plan (AFP) between the ages of 62 to 67 (early retirement plan). Starting at the age of 67, you can retire with a retirement pension. It isn’t possible in the public sector to collect your pension and work/receive a full salary.

What will the newly coordinated rules be like?

The pension from the existing plan included in the National Insurance Plan comprises 66% of income before life expectancy adjustments are made. Calculating what the employer-based pension pays out in addition to that of the National Insurance Plan is called “coordination.” Up to this point, there’s been a lack of coordination rules for employees who collect their pension under the new National Insurance Plan (for people who were born in/after 1954). These rules are now in place: 1) they’ve been designed so that everyone will collect their employer-based pension, and 2) they’ve also been adjusted so that employees who belong to the oldest of these transitional groups and who work longer will be able to collect a slightly larger amount.

What does “individual guarantee” mean?

If you were born in/before 1958, you receive an individual guarantee; this secures you with 30 years of earnings at a total pension level that comprises 66% of your final salary at the age of 67. This individual guarantee will be gradually reduced for people born between 1959 and 1967 (under the old plan, the guaranteed amount was calculated according to an employee’s number of years of employment).

In 2021 personal pension accounts were created for private sector employees who have a defined contribution plan. This account combines all of your pension earnings from defined contribution plans in your own “personal pension account” with your current employer’s pension provider

A personal pension account gathers pension capital certificates in one place.

Before this account was introduced at the start of 2021, a large number of employees had their pension capital certificates held by several different providers; many of these companies charged high management fees. So this account was created to give you better oversight of your finances and at the same time reduce these costly fees.

Contribution rates for Tekna members

As many as 88% of Tekna members have a defined contribution plan. What are the minimum and maximum contribution rates, and what does the average member contribute?

Contractual early retirement pension (AFP)

You might be entitled to receive a contractual early retirement pension (AFP) in addition to your employer-based pension if a certain number of conditions are met. While this applies to both the public and private sectors, these were originally two different services. In the public sector, AFP was originally an early retirement pension; however, this is being revised to a lifelong defined benefit pension plan that’s similar to the private sector plan.

In the private sector, AFP is a lifelong payment that supplements the National Insurance Plan’s retirement pension.

AFP in the private sector is a collectively agreed pension plan. At the same time, you’re not entitled to collect AFP just because your company has a collective agreement about it. On the contrary, there are a number of conditions that must be met for you to receive this benefit.

You have to meet the following conditions in order to collect AFP in the private sector:

  • There’s no accrual of AFP – it’s “all or nothing” at withdrawal
  • The AFP amount depends on the salary you’ve earned between the ages of 13 and 61
  • Can be collected from the age of 62 and must be collected by age 70
  • Can withdraw AFP and work without any reductions made to the AFP amount
  • Must be withdrawn in combination with at least 20% of the National Insurance Plan’s retirement pension

Other conditions for collecting AFP:

  • When you turn 62, at least 7 of the past 9 years must be covered by the plan
  • You must have been a plan member during the past 3 years
  • You must have been employed
  • You must not have collected disability payments after turning 62
  • You must not have collected a pension, unemployment benefits, or other benefits (without a corresponding work obligation) at any time during the 3 years before turning 62 of more than 1.5 G.

You must meet all conditions in order to be eligible for AFP.
Conditions for AFP in the private sector.

Please note that the current requirements for collecting AFP in the private sector differ those found in the former AFP plan. That’s why it’s important for you to take the time to learn about the particular conditions you have to meet in order to become eligible for AFP. It’s very easy to misunderstand these rules, and making the wrong choice might unnecessarily reduce your chances of collecting AFP. Contact the legal department if you’re unsure about what you need to do in order to ensure your eligibility.

If you work in the public sector, AFP is an early retirement pension you can collect between ages 62 and 67 if you were born before 1963.

If you were born in/after 1963, an AFP plan has been introduced that follows the private sector plan; in other words, it has been revised from being an early pension plan to providing lifelong payments. You accrue a pension up to the age of 62; then, AFP may be collected freely between the ages of 62 and 70. Also, you can collect it while working and earning income without having your pension amount reduced. The new AFP plan is calculated using 4.21 percent of pensionable income up to 7.1 G between the ages of 13 and 61.

What about public sector employees who aren’t entitled to AFP? People who don’t qualify for AFP will receive a compulsory occupational pension. This amount is based on 3% of pension-qualifying income up to 7.1 G until you turn 61. It may be collected in addition to employment income between the ages of 62 to 70, and is, similar to an employer-based pension and AFP, a lifelong plan. The “early pension allowance” applies to people born between 1963 and 1970 (people who were born in 1963 are the first who aren’t entitled to the current AFP plan). A transitional annual allowance of up to 0.15G will be given to people who were born in 1963; this allowance is gradually reduced for people born in the years leading up to 1970. It can be collected between the ages of 62 and 67 if you want to retire and collect your pension during this time.

Personal savings – saving for your retirement

In order for you to ensure your financial security when you retire, it can be smart to pay off your debt and/or supplement your income through some form of savings. While there are an unlimited number of ways to save for retirement, there are only a few tax-deductible retirement savings services out there.

Retirement savings service: Individual retirement savings (IPS)

One type of retirement savings is IPS (Individual Retirement Savings), which gives you the opportunity to save up to NOK 15,000 annually with a 22% tax deduction rate.
There’s a minimum 10-year withdrawal period; the tax rate on the return is also 22%. (Before 1 November 2017 returns were taxed as pension and were less favorable.)

Other savings, real estate or shares?

Most people normally save in real estate, banks and/or equity funds, including when they save for retirement. There are different types of risk and return prospects associated with each of these services. A share savings account (ASK) defers taxes on returns on shares and equity funds up to withdrawal.

Self-employed

Self-employed individuals can sign their own agreement on a defined contribution pension plan with annual contributions of up to 7% of their personal income up to 12 times the basic amount G.

Personal pension account

What is a personal pension account, and what does it mean for you?

New pension agreement - Personal pension account

As a membership benefit, Tekna provides one of Norway’s best pension agreements through investment company Kron.
Read about the new pension agreement with Kron.

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Our attorneys answer all of your pension questions

As a member, you receive free legal advice to learn all about pensions and insurance coverage – and how they relate to your own terms of employment.