Pensions in Norway fall into three major divisions; State Pensions, Occupational Pensions and Individual or personal Pensions.
All Norwegians citizens are entitled to get a state pension from the age of 67 in accordance with the Norwegian National Insurance Act (Folketrygdloven). The state pension is paid in full to Norwegian citizens who have lived in Norway for at least 40 years after the age of 16 and in lesser amounts to Norwegian citizens who have lived less time in the country (see Minimal state pension (Minstepensjon)).
The State Pension is calculated according to what the individual has previously earned from ages 16 to 67. The calculation is made by The Norwegian Labour and Welfare Administration (NAV).
The financing of the state pensions is based on a "Pay as you go" system. This means that today's work force is making the payments for the current retirees. The demographic structure in Norway suggests that in the future there will gradually be significantly fewer persons working in proportion to each retired pensioner.
The state pension is divided into three different parts, Public pension base rate (which everyone gets), Special supplement and Dependents supplement. Altogether this makes up the state pension scheme.
The Minimal state pension is a pension scheme which is paid to retirees who have not earned a special supplement (Særtillegg) or who have earned an Occupational pensions which is lower than the State Pension special supplement.
The minimal state pension provision is intended to prevent poverty in old age. All Norwegian citizens over the age of 67 are entitled to claim state pension, including Norwegian citizens who have never accrued pension, or those who have accrued a low pension.
Living costs in Norway are very high and have been increasing tremendously over the past few decades. Therefore, the Norwegian minimal state pension, which has been designed to cover the most basic living expenses in Norway, is adjusted each year to the increasing living costs in Norway.
Norwegian pensioners who have lived most of their lives in Norway and who are entitled the Norwegian minimal state pension are permitted to use this pension money in other countries too – due to this, many Norwegian retirees choose eventually to move abroad after they retire to countries where the Norwegian minimal state pension would provide them a much higher standard of living. On the other hand, Norwegian pensioners who did not live in Norway most of their lives and who are entitled the Norwegian minimal state pension, will receive the Norwegian minimal state pension only if they would stay in Norway for at least nine months each year from the age of 67.
For example, as of 2013 basic factor for single person, calculated is 14208 kr per month(half of that is Basic pension-Grunnpensjon and rest Special supplement-Særtillegg) which is about 2,326 USD, 1,429 GBP or 1,689 EUR per month (). To compare - a Spain which is because of the climate, proximity, union part often chosen by pensioners, have average Spanish worker earns of €1,615 per month, and minimal wage of 752.9 .
Occupational pension schemes are arrangements established by employers to provide pension and related benefits for their employees.
From 2006, all employers in Norway are required to provide an occupational pension (see mandatory occupational pensions section below) for their employees.
The mandatory occupational pensions (called "Obligatorisk tjenestepensjon" or OTP in Norwegian) were initially introduced in 2007 to cover employees who were not already covered by pension schemes. Many Norwegian workers have no other plan in store than the state pension scheme of the National Insurance. In order to change this, the OTP pension scheme was introduced. It is up to the individual companies to decide if they would rather choose a contribution scheme or a scheme based on the putting part of the employee’s salary aside for them to have at retirement. The premium and the pension costs for the OTP pension scheme are paid in full by the employer. The minimum contribution is 2% of the salary funds. The employee can contribute, but this is voluntary. The pension scheme must be the same for everyone in the company who has an income of above 1G. It is not legally required for employees with an income of over 12G.
Contractual pension (called "Avtalefestet pensjon" or "AFP") is an early retirement pension scheme given to employees of companies which participate in the AFP pension scheme through a collective agreement (overenskomst).
The scheme was initially introduced in 1988 when the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO) reached an agreement according to which the employees would be able to get their pension from the age of 66 years. According to the initial arrangement, the employees which took part in this pension scheme were entitled to receive an early retirement at the age of 66 if they wanted it. Later, the LO and the NHO negotiated on a lower retirement age. This pension scheme retirement age is currently 62. Eighty percent of today's 62-year-olds in Norway are entitled to get this pension scheme. Initially this pension scheme was only meant for those who were working in the hard industrial jobs, but eventually more groups became involved as other trade unions and employers' organizations also joined this pension scheme. The state has gradually joined this scheme.
This pension scheme is received in addition to the state pension scheme.
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It is also possible for an individual to make contributions under an arrangement they themselves make with a provider (such as an insurance company). Contributions are typically invested during an individual's working life, and then used to purchase a pension at or following retirement.
The seamen pension arrangement (called “Pensjonstrygden for sjømenn” in Norwegian) was established as a mandatory pension scheme by law on 3 December 1948, and its primary aim was to provide the pension for retired seamen, or their widows. Today it mainly covers retired seamen pensions between the ages 60 and 67. It is financed by fees taken from seafarers and shipping companies and by grants given by the state.
This pension arrangement covers:
Seafarer in this context includes some personnel in offshore- related industries, some rescue personnel at sea, and some groups of personnel on cruise- ships.
Public sector employees are covered by the Norwegian Public Service Pension Fund (called "Statens pensjonskasse" in Norwegian) .
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The Norwegian pension reform was initially announced in 2001 when the government appointed a special pensions commission. The commission which was led by Sigbjørn Johnsen consisted of both politicians and independent experts. The Parliament of Norway adopted the new regulations in the spring of 2009. The reform is scheduled for completion and would be fully implemented in 2025. The new regulations of the new "Flexible Retirement Act" (Ny fleksibel alderspensjon) have been implemented gradually since 2010. The reason for introducing new regulations in the retirement plans schemes was to be able to maintain a sustainable pension system which would be capable of handling an increase in the number of retired Norwegians/higher life expectancy, while at the same time less children are born. The pension reform is therefore intended to encourage more people to stay for a longer period in the workforce after retirement age.