New Hybrid Pension Product In Private Sector


The new Occupational Pension Act entered into force 1 January this year. The Act allows private employers to establish a third kind of pension scheme, being a hybrid between defined benefit and defined contribution schemes. As such, the new product is already being referred to as the new "hybrid-scheme".

Furthermore, there have been changes in the regulations following the Occupational Pension Act. It is now possible for employers to pay a substantial higher amount to the pension plan in defined contribution schemes than earlier permitted. As earlier, employers' pension payments will be tax deductible for the employer and will not be subject for taxation for the employee until payment date. The changes imply, in principle, that employers may provide substantially higher pension contributions to pension schemes than earlier. Due to the high cost and wage level in Norway it remains to be seen in the longer term whether or not the changes will have any significant effect, though.

New collective occupational pension product


The pension product presented in the new Occupational Pension Act, is an alternative to the two other (main) types of tax favorable occupational pension schemes. Therefore, it is often referred to as a "hybrid- solution".

The contribution element involves the employer paying an annual pension contribution of the employee's salary to the pension plan. The contribution will be based on the first amount the employee has earned. The employer is now able to pay an annual amount equivalent to a maximum of 7 % of the employee's salary, limited up to 12 times of The National Insurance's base amount (The National Insurance's base amount - "G" - is per 1 May 2013 NOK 85 245,-). In addition, the employer may pay a supplementary contribution of up to 18.1 % of the employee's salary between 7.1 G and 12 G. Hence, the new payment values allows the employer to pay a maximum of 7 % of the employee's salary up to 7 G, and a total of 25.1 % of the employee's salary between 7.1 and 12 G. These payments are deductable for the employer, and are not subject to taxation for the employee prior to the disbursement date.

The performance element in the new product involves that the employee, on the time of disbursal, is guaranteed an annual pension payment of a certain level. However, the actual amount is not definite until the disbursement date (the retirement date). The annual amount is based on the employee's pension holdings (the...

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