Leni Aurora Brækhus

foreignworkers@lomedia.no 

Although the normal retirement age in Norway is 67, many pension schemes offer the option of pension pay-outs from as early as the age of 62.

The size of your pension will depend on a variety of factors, such as the number of years you have lived in Norway, the number of years you worked and your earnings.

Your pension could come from a variety of different sources:

• A retirement pension paid out by the Norwegian National Insurance scheme

• A pension from an employer’s mandatory occupational pension scheme

• A contractual retirement pension scheme (AFP) (for private sector employees)

• A voluntary private pension savings scheme (which is not covered in this article)

In this article we will provide a brief explanation of the three schemes and the rules that will apply to your pension if you move from Norway to another country.

This is how you should read the article:

You accumulate the right to an old age pension from the Norwegian National Insurance scheme regardless of whether you work for a private company (in the private sector) or for central government, local government or another public agency (the public sector). Find out more about the retirement pension from the Norwegian National Insurance scheme.

In the case of AFP and mandatory occupational pension schemes, different rules will apply depending on whether you work in the private sector or the public sector. The two systems are discussed in two separate parts of the article. Read the section that applies to you.

Since changes have recently been made or are being made to these schemes, different rules may apply depending on the year in which you were born. Find out about the rules that apply to your age group.

Retirement pension from the Norwegian National Insurance scheme

Norwegian National Insurance scheme pensions are paid out by NAV (Norwegian Labour and Welfare Administration) and will, in most cases, make up the greatest proportion of your overall pension. Some of the money we pay in taxes pays for the National Insurance scheme pension.

A minimum of five years of insurance time

The National Insurance scheme retirement pension is calculated based on what is termed insurance time.

Insurance time is awarded for periods during which you are resident in and/or work in Norway and are a member of the National Insurance scheme and is calculated from the date on which you reach the age of 16 and until the year in which you reach the age of 66. Insurance time also includes calendar years in which you earn what are termed pension points after reaching the age of 66.

As a rule, everyone living in Norway is a member of the Norwegian National Insurance scheme. If you work in Norway legally, you will, as a rule, automatically be registered in the National Insurance scheme from your first day of employment.

You will, as a rule, require five years of insurance time in Norway to qualify for a Norwegian retirement pension.

However, insurance time from Norway can be combined with insurance time from another EEA country (all European Union countries + Iceland, Lichtenstein and Norway, plus EFTA member Switzerland) to make up a minimum period of five years. In order to combine insurance times in this way, you will need to have at least one year of insurance time in Norway.

According to NAV, the same applies to some of the social security agreements that Norway has with other countries outside the EEA.

Contribution rules under the new and old schemes

The way your retirement pension is calculated will depend on the year in which you were born.

• Born in or after 1963

If you were born in 1963 or later, you are subject to the new rules on contributions, in which case the following will apply:

Each year, 18.1 per cent of your pay, up to 7.1 times the basic National Insurance amount (referred to as G), will be set aside. At present, 7.1 G represents approx. NOK 750,000.

– The size of your pension will very much depend on the size of your pay packet and how long you continue working for, says pensions expert Steinar Fuglevaag of Fagforbundet (Norwegian Union of Municipal and General Employees).

• Born before 1954

If you were born before 1954, the old rules on contributions will apply. Each year your income between 1 G and 12 G will be converted to pension points. To qualify for a full retirement pension, you need 40 years of pension points, but the 20 years of pension points in which you received your highest income will determine the size of your pension.

• Born between 1954 and 1962

If you were born between 1954 and 1962, a combination of the old and new contribution rules will apply.

What happens to accrued retirement pension from the National Insurance scheme if you move away from Norway?

• Moving to a country with a social security agreement with Norway

Norway has social security agreements with the EEA states and several other countries. These agreements make it easier for you to take your retirement pension with you to another country.

– If you are receiving a retirement pension and move to another EU/EEA country you will, as a general rule, be able to take your pension with you irrespective of your contribution time, says Mona Fosse, acting head of section at NAV in an e-mail to FriFagbevegelse.

Norway currently has social security agreements with the United States, Canada, Québec, Chile, Israel, India, Australia, Great Britain and Northern Ireland, Turkey, Serbia, Bosnia-Herzegovina, and Montenegro. In some cases, the agreement applies to all residents of the two parties to the agreement, in other cases the agreement only applies to citizens of the countries in question.

– Even when you move to a country that Norway has a social security agreement with your pension can, as a general rule, be paid out, says Fosse.

• Moving to a country without a social security agreement

If you move to a country that Norway does not have a social security agreement with, different rules will apply, depending on the year in which you were born.

You were born in 1963 or later and move to a country without a social security agreement with Norway:

• Your income-related pension, in other words the amount that is saved up based on your income, will be paid out irrespective of the length of time you have worked in Norway, according to NAV.

• The guaranteed minimum pension paid to individuals with low or no contributions towards an income-related pension will only be paid out if you have accrued a minimum of 20 years of insurance time. 

You were born before 1954 and move to a country without a social security agreement with Norway:

– In order to be entitled to draw a retirement pension that you have earned in Norway you must meet the minimum conditions on contributions, which as a general rule will be five years of insurance time in Norway, says Mona Fosse.

– To qualify for a full retirement pension paid out outside Norway,  you will need to have a minimum of 20 years of residence/insurance time in Norway after the age of 16, she continues.

If you have not been resident in Norway for 20 years after reaching the age of 16 your pension will only be paid out if you have accumulated pension points – and payments will continue for as many years as you have accumulated pension points.

If you were born between 1954 and 1962, you will be subject to the rules governing both the old and the new retirement pension schemes.

Acquaint yourself with the applicable rules before you move

Moving to a foreign country could result in a reduction in your retirement pension or you may receive nothing at all, explains Fosse.

– It is important that you find out what will happen to your retirement pension when you move from Norway, before you actually move, she continues.

Report your change of address

When you move to a foreign country, you must notify both NAV and the National Population Register. NAV may ask retired people living outside Norway to submit evidence that they are still alive (certificate of life).

Are you employed by a private sector company? Read about the private sector below.

Are you employed by a local authority, central government or a public sector agency? Go straight to the public sector pension schemes.

THE PRIVATE SECTOR:

Mandatory occupational pension

The second source of your pension is called an occupational pension scheme.

In Norway, private sector employers are in most cases required to set money aside for an occupational pension for their employees. This pension is called a mandatory occupational pension (OTP).

In the past, you were only entitled to an occupational pension based on the amount you earned over and above the basic National Insurance amount (1 G) after you had reached the age of 20. You also had to work for the same employer for over a year in order to take your accrued pension with you.

The rules were changed with effect from 1 January 2022.

A pension from the first NOK you earn

– From this year onwards, pension contributions will accumulate from the first NOK you earn. This means that everyone working in Norway, from the age of 13, will be entitled to accumulate pension contributions, Trond Tørstad, General Manager of Norsk Pensjon, tells FriFagbevegelse.

However, companies have been given until 30 June to adjust their pension schemes to these new rules.

Defined contribution pension schemes

In the private sector, the most popular kind of pension is a defined contribution pension. This is a savings scheme where the employer pays money into the pension account of each employee, at the rate of a minimum of two per cent and a maximum of seven per cent, up to a maximum of 7.1 times the basic National Insurance amount (7.1 G).

– Let’s say that your employer saves two per cent of your pay and you have earned NOK 50,000 . This means that an annual contribution of NOK 1,000 will be paid into your pension account, Tørstad explains.

If your employer saves seven per cent of your income of NOK 50,000, the annual contribution will amount to NOK 3,500.

– The difference between saving two per cent and seven per cent of your pay for 40 years is substantial. So, there is a big difference between a good and a bad pension scheme,” says Fagforbundet’s pensions expert Steinar Fuglevaag.

The money, and the returns it earns, can be withdrawn when you retire. The pension must be paid out over a period of at least 10 years and as a minimum until you reach at least 77 years of age. If your savings are limited, however, the payment period may be reduced so that you receive a higher payment for a shorter period.

Hybrid pensions

In a hybrid pension scheme, the employer sets aside a fixed percentage of the employee’s pay for a pension. The percentage rate is the same for all employees, however the employer pays a supplement for women since they, on average, live longer than men.

The pension can be paid out from age 62 onwards at the earliest. As a rule, the payments are lifelong. The exception is if the company pension plan has a fixed point at which the pension payments stop, explains Stefi Kiefulf Prytz, Director of Life Assurance and Pensions at Finans Norge.

What happens to your occupational pension if you move to another country?

You are entitled to have the amount you have saved in the mandatory occupational pension scheme paid out even if you move to a different country, explains Trond Tørstad of Norsk Pensjon.

If you have a defined contribution pension, your occupational pension from your various employers will be paid into your pension account. When you reach retirement age, you can withdraw the money over a period of at least 10 years.

– It is almost like having a backpack full of money that you carry with you, with the returns on the savings being added to the amount in the backpack as they accumulate. This money can be paid into an account abroad if you move away from Norway, although withholding tax payable to Norway will be deducted from the payments, he explains.

You are also entitled to payment of the amount you have saved in a hybrid pension scheme if you move to a different country, according to Stefi Kiefulf Prytz.

Notification of change of address and certificate of life

If you have worked in Norway for part of your professional life and then moved abroad, you must notify your pension provider. The pension provider may also require regular proof that you are still alive (a certificate of life) and if they fail to receive this confirmation, payments may be stopped.

It makes no difference what country you move to. If your pension provider knows which account the money is to be paid into and receives a certificate of life you will receive your occupational pension.

Contractual retirement pension schemes (AFP) in the private sector

A contractual retirement pension scheme (AFP) is a pension scheme that you may be entitled to if you work for a company with a collective agreement that includes AFP. In addition, you will need to meet several other requirements in order to be entitled to draw an AFP. (See the fact box at the bottom of this article.)

In the private sector, an AFP is a benefit you receive as an addition to your National Insurance scheme pension. Once you reach the age of 62, you can start drawing your AFP even if you continue working.

What happens to your private AFP if you move to another country?

When you start drawing a private AFP you must be working for a company where you are covered by a Norwegian collective agreement with AFP cover. Furthermore, you will need to start drawing your pension before you stop working. The earliest you can do this is the month after you reach the age of 62, explains Svein Aartun Bye, Deputy Director of Fellesordningen for AFP, which manages the AFP scheme for the private sector.

– In practice, this means that you will, in most cases, need to start drawing your AFP before you move to another country, he tells FriFagbevegelse.

People who have already started drawing an AFP pension in the private sector will retain their AFP irrespective of whether they live in Norway or move abroad, according to NAV.

When payments are made to pensioners living outside Norway, the recipient will be required to cover the extra costs of transferring the pension to a foreign bank account. These costs will be deducted from the payments.

THE PUBLIC SECTOR:

Public-sector occupational pension scheme

Employees working in the public sector – for central government, municipalities, county municipalities, health service trusts or other public sector agencies – receive a public-sector occupational pension.

In a public-sector occupational pension scheme, you will receive pension payments for the rest of your life.

Government employees and teachers save for their pensions through the Norwegian Public Service Pension Fund.

The biggest pension provider for municipal employees is KLP, although there are also other providers. The rules are generally the same for all municipal employees.

The various schemes differ depending on when you were born.

People born before 1963 receive a gross pension.

A gross pension means that the pension you receive from your employer plus the pension you receive from the National Insurance scheme will make up a specific percentage portion of the pay you receive when you stop working. In the public sector you will receive a pension that amounts to 66 per cent of your final salary when you start drawing your pension at the age of 67. This applies to people who have made all their contributions and were born before 1959.

In order to attain the maximum contribution, you must have worked for 30 years in the public sector. People born between 1959 and 1962 receive slightly less than 66 per cent when they start drawing their pension at the age of 67.

With effect from 2020, people born in 1963 or later receive a premium pension.

The way that your premium pension accumulates is that a proportion of your pay is set aside in a pension scheme. The pension scheme is added to for every year that you work in a public-sector position from the age of 13 and up to the age of 75.

To simplify: if you were born in 1963 or later and started working in the public sector in 2020 or later, your total annual contribution from the National Insurance scheme and public-sector occupational pension will be 23.8% of what you earn, up to approx. MNOK 1.3 .

When you start drawing your pension, the amount you have saved up will be converted to a pension based on a variety of factors.

– For example, the pension will continue to grow the longer you leave to withdraw it. Furthermore, it will be adjusted to consider the life expectancy of your cohort, says Øyvind Røst, pensions specialist at KLP.

– You can choose whether you wish to stay on in your job and postpone your pension withdrawal until you stop working or whether you wish to draw your pension and continue working, he adds.

– The contributions of people born in 1963 or later who were employed in the public sector before 2020 are based on both the new and the old rules.

– Payment of a public-sector occupational pension is conditional on a minimum earnings requirement and this requirement varies depending on when you were born and when you worked in the public sector, Røst explains.

If you paid contributions before 2020 or were born before 1963, the requirement to receive a public-sector occupational pension is a minimum of three years of contributions. If your contributions were made after 2020 and you were born after 1963 there is a requirement of at least one year of contributions.

What happens to your public-sector occupational pension if you move abroad?

You are entitled to withdraw what you earned under a public-sector occupational pension scheme if you move to a different country.

It makes no difference what country you move to. As long as the pension provider knows which account the money is to be paid into you, will receive your occupational pension.

The pension provider may also request confirmation on an ongoing basis that you are alive (certificate of life), and may discontinue payments if they do not receive this confirmation.

If you live abroad and are not liable for taxation to Norway as a resident, you must normally pay withholding tax (15 per cent) to Norway on your Norwegian pension.

Contractual early retirement pension scheme (AFP) in the public sector

• Born before 1963

At present, in the public sector, AFP (contractual early retirement pension scheme) is an arrangement that enables people to retire earlier. The early retirement pension can be paid out at the earliest from the age of 62 and no longer than until the month before you reach the age of 67.

This arrangement only applies to people born before 1963.

It is not the intention that the scheme should be combined with paid work, although you may earn up to NOK 30,000 a year if you have a municipal AFP pension and up to NOK 15,000 a year if you have a public-sector AFP pension as a central government employee. If you earn more than this either in Norway or abroad, the AFP payment must be reduced by a proportionate amount. It is your responsibility to inform the AFP provider if your annual income exceeds this amount.

In the case of central government employees, NAV calculates AFP payments until you reach the age of 65 and must be provided with information about this. Once you reach the age of 65, the Norwegian Public Service Pension Fund (SPK) assumes responsibility. For municipal employees, the occupational pension provider to the local authority will be responsible throughout the entire period.

From the age of 65 onwards, you may receive an AFP pension from SPK calculated as a retirement pension. The same rules will apply as when you have an income in addition to your normal retirement pension.

– AFP is a scheme that you need to be qualified to draw. A range of different requirements need to be fulfilled and there are a few traps that you risk falling into with the resultant loss of your AFP. For this reason, it is important that you acquaint yourself with the rules that apply to the AFP scheme of which you are part, before you reach the age of 62, says Røst.

One of the requirements of the public sector AFP pension for those born before 1963 is that you must still be in employment in the public sector when you start drawing the public sector AFP pension. If you left the job without having started to draw the pension, you will forfeit the right to an AFP pension.

• Born in or after 1963

The public sector AFP is different for people born in or after 1963.

– It is not yet fully formed but it appears to be a lifelong scheme in which the pension increases in size the longer you wait before you draw it, says Røst.

Are you entitled to take the public sector AFP with you if you move abroad?

– As long as you fulfil the requirements to receive a public-sector AFP and withdraw it before you stop working in the public sector you can take a public-sector AFP with you abroad, Røst explains.

– If you move abroad after you have withdrawn your public-sector AFP, it will have no effect on the payments, says the pensions specialist.

Familiarise yourself with your rights

Røst emphasises that it is important to understand the rules that apply to you before you leave your job in the public sector.

– Seeking advice about your pension entitlements from a colleague may not be wise because their circumstances may be different.

– The amount you have earned, the length of your contribution time, whether you have worked full-time or part-time and the year of your birth will all have an impact on your rights, he explains.

Facts about the conditions governing private sector AFP schemes:

Even if you work for a company that is part of the scheme, you will not necessarily be guaranteed to qualify for a private AFP pension.

These are some of the requirements that you will need to fulfil:

When you reach your 62nd birthday, your primary employer during seven of the last nine years must have been a company in the AFP scheme*. Your full-time equivalent (FTE) position must be a minimum of 20 per cent and your primary source of income must have been from the AFP company during this time.

* Separate transitionary rules apply to people born between 1944 and 1955.

When you start withdrawing an AFP pension you must continue to be employed by the AFP company.

Furthermore, you must have worked every month in a minimum of a 20 per cent FTE position in an AFP company in the last three years.

However:

• You may have a break in continuity of up to 26 weeks, but not at the start or end of the period.

• This period is increased by a further 78**weeks if you are on sick leave from an AFP company

** Applies to applicants born on 1 March 1955 or later. This rule was amended in 2018 –the period was previously 26 weeks.

Furthermore, your income in the last financial year must have been a minimum of 1 G. Your average monthly salary in the current year converted to annual salary must exceed 1 G.

You must also be drawing a National Insurance scheme pension at the same time as the AFP pension.

These are just the main requirements. If you are planning on drawing an AFP pension, it is important that you acquaint yourself with all the conditions that will apply. Find out more about the conditions at afp.no (information in Norwegian only).

Facts about the contractual early retirement pension scheme (AFP) in the public sector:

The following applies to people born before 1963:

In order to qualify for a public-sector AFP pension as a government employee you must:

• Be employed in a position that qualifies you for membership of the Norwegian Public Service Pension Fund (SPK) up until the date you retire on an AFP pension. 

• Have received an income of more than twice the basic National Insurance amount (G) for at least 10 years and have received an income of at least 1 G in the last two years before you retire on an AFP pension. 

In addition, you must have:

• Either been a member of SPK for 10 years after reaching the age of 50 or have 10 years of contributions to the National Insurance scheme with an income of at least 1 G after reaching the age of 50. 

To qualify for a public-sector AFP as an employee of a municipality or a health trust, you must:

• Draw an AFP pension from the age of 62 onwards and you must be in employment and be registered with KLP or another municipal pension fund in your final three years before retirement. 

• Be employed in a position that as a minimum is 20 per cent FTE (full-time equivalent) and receive an annual income of at least 1 G. 

• Have worked in Norway for at least 10 years after reaching the age of 50. 

The basic National Insurance amount (1 G) as of May 2021 is NOK 106,399.

The rules governing AFP for people born after 1963 have not yet been finalised.

Sources: klp.no, spk.no

Translated by Robert Lovering

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