Storebrand ASA: Transitional rules - new private occupational pension products
The Banking Law Commission's report NOU 2013:3 was submitted to the Ministry of
Finance today. The Banking Law Commission proposes rules for transition from the
present defined benefit occupational pension products to the new defined
contribution products in NOU 2012:13.
The commission's report will now go to public consultation. The Ministry of
Finance intends to present a bill to the Storting during 2H 2013. The new rules
are expected to come into effect on 01.01.2014.
The proposals allow for a transition from the present defined benefit products
to the new occupational pension products. Storebrand takes a positive view of:
* The proposal to increase the maximum savings limits for the present defined
contribution pension schemes.
* The way in which the proposals would facilitate a long-term adaptation to
long life by means of escalation plans.
* Â The way in which these escalation plans could also allow for a more
appropriate guarantee structure for pension rights from the defined benefit
schemes. The Ministry of Finance is expected to provide more detailed rules
about this in the regulations.
From now on, new occupational pensionÂ premiums will normally occur in defined
contribution based occupational pension products that are well suited to
Solvency II and the low interest rate level. The challenges for paid-up policies
under Solvency II, as described in NOU 2012:3, will not however be resolved
through the measures proposed in the report. The significance of the proposals
for capital requirements under Solvency II will depend on how the escalation
plans are formulated, the final treatment of earned rights and the adaptions to
the proposals by pension providers and customers.
Many dissenting comments have been appended to the report and the proposals may
be changed after the consultation process.
About the proposal
1. The Banking Law Commission proposes to raise the maximum limits for savings
in the present defined-contribution pension schemes so that they correspond
to what is proposed for the new hybrid products (maximum limit increased
from 8% to 26.1%).
2. From now on, pension earnings will normally occur either in the new
contribution-based hybrid products or in the present defined-contribution
schemes. Allowance is made however for continuing the defined-benefit
pensions of older employees born before 1962. Premiums for continuing
defined-benefit pensions will be based on new mortality rates.
3. The report proposes a transition arrangement in which existing defined
benefit pension earnings may be continued within the pension scheme. Premium
reserves and additional statutory reserves linked to pension rights that
have already been earned will be continued as separate pension holdings.
Costs for these pension holdings will be covered by the employer and kept
separate from new premiums.
4. It is proposed that paid-up policies are converted into pension certificates
following the same principles as above. The pension holdings shall be
sufficient to cover obligations on the date of payment. In the event that
cover is insufficient, an escalation plan will be initiated. The proposed
legislation gives the Ministry of Finance the authority to determine rules
for such escalation plans in regulations.
The holder of a pension certificate can choose the investment option for the
pension holdings. Members with pension holdings linked to earnings in defined-
benefit schemes (see point 3) can also choose the investment option for these.
Â When the investment option is chosen, the guarantee linked to the pension
certificate/pension holding is given up at the same time.
The Banking Law Commission is now starting work on adapting the rules for death
and disability coverage to the new pension products and new National Insurance.
This part of the work will also include proposals for a review of the transfer
rules, so as to adapt them to the new products. The Banking Law Commission aims
to have this report completed during 2013.
In connection with publication, Storebrand is arranging a telephone conference
on 7(th) January at 15:30 CET. The telephone conference will be in English and
the presentation material will be available from our website before the
To take part in the conference, please telephone +47 23184536. You will also be
able to follow the telephone conference via a link from our website
Lysaker, 7 January 2013
Director of Public Affairs Jan Otto Risebrobakken: Mobile +47 48 08 26 02
Head of Investor Relations Trond Finn Eriksen: Mobile +47 99 16 41 35
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Source: Storebrand ASA via Thomson Reuters ONE