Polarization in old age pension? Occupational pension as a driver of new inequalities
The 2011 pension reform changed the principles for pension accrual in the National Insurance scheme in Norway. At the same time, the former early retirement scheme AFP was transformed, and all private sector enterprises were mandated to establish an occupational pension for their employees.
Most employees in Norway are by now familiar with the new incentives structure in the National Insurance. The privatization of pension that follows from the pension reform is however rarely discussed. Privatization implies that the state pension decreases in importance, and that workplace-based arrangements play a bigger role. The AFP scheme, which since the reform has provided a life-long top-up pension for those covered, is negotiated as part of sectorial wage bargaining, and is available in all enterprises covered by a collective agreement. Occupational pensions, on the other hand, are owned and governed by individual firms. Occupational pensions can be based on defined contributions (DC) or defined benefits (DB), yet the overwhelming majority of private sector schemes are DC. Many of them use the minimum mandatory savings rate (2 per cent of wages above a threshold), while others are far more generous.
Mappings of occupational pension coverage show that the two largest groups in the Norwegian labour market are (1) those who have both AFP and an occupational pension with a high savings rate, and (2) those who have minimum occupational pensions and no AFP. This suggests a polarization that is rarely discussed: some have minimum arrangements; others get the best of both worlds. The aim of this project is to give an up-to-date overview of who gains and who loses, and discuss the interplay between occupational pensions and the redistributive mechanisms in the National Insurance. The project is carried out in collaboration with PensjonsLAB.
