A new law on the pension scheme for Members of the Norwegian Parliament (MPs) and members of the government entered into force on 1 January 2012.
The result of this was that the former pension schemes were replaced by a single scheme which is based on the same principles as the National Insurance Scheme’s retirement pension. The retirement pension is now awarded as a direct supplement to the National Insurance Scheme’s retirement pension.
Among other things, the scheme has changed from being a gross pension scheme based on the member in question’s final salary to being a net model.
2. Principle features of the current pension scheme
The following is a summary of the most important features of the pension scheme that entered into force on 1 January 2012.
- Members of the pension scheme (MPs and members of the government) earn retirement pension rights on an annual basis in the form of a pension account. The pension account is earned on the basis of a fixed percentage of the remuneration for MPs or members of government. It comprises 6.03% of remuneration for up to 7.1 times the public pension base rate (abbreviated as G) and 24.13% of remuneration between 7.1 G and 12 G. As of 1 May 2016, G = NOK 92 576. The pension account is wage-indexed up to the point at which the retirement pension is taken out.
- The annual retirement pension is calculated by dividing the total accumulated pension account by a certain figure. This figure reflects the beneficiary’s expected life expectancy at the time when the pension is taken out. The figure is designed so that the pension is life-expectancy adjusted in the same way as for the National Insurance Scheme.
- The retirement pension may be taken out flexibly from the age of 62 onwards. In general, the rules for this follow the same principals as for the National Insurance Scheme. If the pension has not been taken out by the time the person concerned reaches the age of 75, payment must start as of the month after the person has reached the age of 75. A person may combine working with receiving a pension without this reducing the pension.
- As a rule, survivor’s pensions are covered by the rules of the Norwegian Public Service Pension Fund Act of 28 July 1949 No.26.
- Before payment starts, the accumulated pension rights are wage-indexed annually. Retirement pensions that are being paid are also wage-indexed, and 0.75% is then deducted from the amount. In this way, the principles for regulating pensions are the same as for the National Insurance Scheme. Retirement pensions taken out before the age of 67 shall be converted from the month after the member in question reaches the age of 67. This is done by adjusting the total accumulated pension account in line with wage growth from the point at which it is taken out to the time at which it is converted.
- Pensions that are earned on the basis of the new rules shall not be co-ordinated with other pension benefits.
- There are certain transitional rules that are designed to ensure that earned pensions are correct in relation to the former pension scheme for MPs and the former pension scheme for members of government. For those who have earned pensions on the basis of both the old and the current pension scheme, the total pension must not exceed the calculated maximum pension. MPs who had not earned pension rights before 1 October 2009, and members of government who had not earned pension rights before 1 January 2012 earn pension rights based on the scheme that has been in effect since 1 October 2009. For all other members of the scheme, the current rules were applicable as of 1 January 2012.
- MPs who qualified to receive a pension under the former scheme for MPs have had this right continued in the current Act. In the former scheme, a full retirement pension was awarded after 12 years’ service as an MP and made up 66% of pensionable income. Those with less than 12 years’ service had their pensions reduced accordingly. The pensionable income was based on the previous annual gross remuneration for MPs. For those MPs who were in receipt of a retirement pension as of 1 January 2011, the total accumulated pension account was fixed at the annual gross remuneration at that time. The same applied for those who had ceased to be in office before 1 January 2011 without having taken out the pension. These pensions are regulated on the same basis as in the current scheme.
- MPs who had earned part of but not full pension rights under the former scheme and who have continued to earn pension rights in the current scheme may qualify for a pension partly on the basis of the old scheme and partly on the basis of the current scheme. That said, the total pension account of the old and new scheme may not exceed the full pension account under the old scheme.
- The Disability Pensions Act of 7 March 2014 No.5 entailed that as of 1 January 2015 the rules for disability pensions for MPs and members of government were adjusted to the new rules that were simultaneously passed for the Norwegian Public Service Pension Fund. The changes imply, inter alia, that disability pensions are converted into net benefits. Consequently, disability pensions are paid as a supplement to the National Insurance Scheme’s disability benefit, rather than being co-ordinated with other pensions and benefits. New rules have also been issued regarding the reduction of disability pensions against earned income. When the annual tax settlement is ready, the Norwegian Public Service Pension Fund checks to make sure that the correct disability pension has been paid. If there is a discrepancy either way, a final settlement is made. The decision was made that disability pensions currently being paid would be brought into line with the new regulations as of 1 January 2015.
3. Principle features of the pension scheme for MPs before 1 January 2012
- The retirement pension is a gross pension that is co-ordinated with other pension benefits under the Co-ordination of Pension and National Insurance Benefits Act.
- The pension age is 65. Under this scheme, a retirement pension may be awarded before the age of 65 if the sum of the person’s age and their length of service as an MP as of 1 January 2012 amounts to at least 75 in total (the so-called “75-year rule”). However, this does not apply if the MP in question’s earnings exceed the earnings limit.
- The retirement pension may not be paid if the person in question is a serving MP or a member of government. The same applies for those with an 80% or more position in the state or local government or with an 80% or more position as a local government representative.
- The retirement pension awarded to MPs between the age of 65 and 67 may not be taken out before the age of 62. The sum of the retirement pension for the period from 65 to 67 is divided up and paid out from the point at which the pension is taken out to the age of 67. The retirement pension that is taken out under this arrangement may not be combined with a retirement pension paid out under the 75-year rule.
- The retirement pension is life-expectancy adjusted from the age of 67 for those born in 1943 or later.
- Retirement pensions under payment are wage-indexed, and 0.75% is then deducted. Pensionable income is wage-indexed on an annual basis up to the point at which the pension is taken out.