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On January 1, 2021, the “own pension account” comes into effect. This means that everyone working in the private sector, around 1.5 million Norwegians, will be able to collect all pension savings from current and former employers in one place.
– All employers are required by law to set aside money for their employees’ pensions, at least two percent, says Lene Drange, who is a financial advisor and manages the Snaponomi Instagram account.
Today, only a few make active decisions related to their defined contribution pension, both in terms of increasing participation and collecting certificates of pension capital in one place. After the New Year, it will be easier and clearer.
– The rules are changed for all employees of private companies. Then it will be for them to get a separate pension account that they can place wherever they want. This is good news, because it gives you the freedom to choose what you think is best for you, says Drange.
They receive their own pension account
The Storting has decided that those who work for a company with a defined contribution pension will be able to collect all their pension savings in one place, in a so-called ‘own pension account’.
Everyone who works earns a pension that is paid at retirement age. In addition to the old-age pensions of the National Insurance Scheme, to which everyone living or working in Norway is entitled, employees are also entitled to an occupational pension.
For public employees, the scheme is a public occupational pension, while the most common in the private sector is a defined contribution pension. Defined contribution pension means that the employer saves a percentage of the employee’s salary for retirement.
For those who have worked for multiple employers and thus saved defined contribution pensions with multiple pension providers, it can quickly get confusing.
Therefore, the authorities are now introducing their own pension account, where all accumulated pensions from different employers are collected.
Lower costs
If you have worked for multiple employers in the private sector, you may end up having pension savings with many different pension providers. This quickly becomes confusing and no less profitable because you pay fees to all providers.
– The background to a pension account is that employees should have a better overview of their own pension. It will also lead to lower costs, mainly because the vast majority get fewer pension providers, Drange says.
He points out that there will also be increased competition between providers, which in turn should lead to lower costs.
– You get more power as a consumer. This applies regardless of whether you have a new or old job.
Reserve 30 minutes
If you are one of the 1.5 million Norwegians who have a defined contribution pension, entering your own pension account means that, from approximately February 1 to May 1, you must decide which company will manage your pension.
– If you do not take any active action, your money will automatically be placed in the company chosen by your employer. But you can also choose another provider, the so-called self-selected provider, says Elisabeth Realfsen, head of the service at the Finansportalen Consumers Council.
Drange recommends that you spend some time making a decision.
– Check where the pension should be. Set aside 30 minutes and you’ll get a much better performance, says Drange.
– Costs are the keyword
To find out if you should choose another pension provider, you must first find out what their conditions are today. Then you can research what other providers offer.
– You must have at least offers from three different banks and compare them with each other. It may be wise to steer clear of traditional big banks, because they are often expensive, Drange says.
She compares the choice to what to do if she is going to invest in another way, which is to look at conditions and make a decision based on risk, industry, track record, and costs.
– Evaluate this against what you want and what is right for you. But costs are probably the keyword here, says Drange.
As of February 1, 2021, Finansportalen will have an overview of the companies you can choose from and the prices that apply to your own pension account with the various providers.
– Consumers should carefully observe the rates that apply both to the employer’s company and to the other companies that offer their own pension account, says Realfsen.
Two rates
Realfsen explains that there are two types of fees that you need to make sure are as low as possible.
– One is the administration fee, which is paid by the employer if it remains in the employer’s company. With a self-selected provider, you pay yourself, Realfsen says.
The second is the management fee, which the employee must cover in relation to the accumulation of pension from his current job.
– Management fee for pension income from a previous job that you must pay yourself. However, you will receive the same conditions on the management fee that your employee has negotiated.
Head of Finansportalen, Elisabeth Realfsen. Photo: Ole Walter Jacobsen
If you choose a provider other than the one chosen by the employee, in principle you will have to pay all the management costs yourself.
– But you will receive standard compensation from the employer to cover management expenses related to the accumulation of pensions that arise from your current job, says Realfsen.
The standard compensation should correspond to the management fee that the employer would have paid for you if you had stayed with the employer’s business with standard management.
This means that if you choose a self-selected provider that offers good prices, for example in a global equity fund, you may want to get the most out of it by accepting standard compensation and choosing a provider of your choice.
– You can pick and choose
Now that pension providers have to fight for you as a customer, you can expect to be contacted for various offers.
– Time will tell, but we imagine that small market competitors will market themselves more actively than large established suppliers. If you are a member of some employee organizations, such as Akademikerne or NITO, you will likely be contacted by them, Realfsen says.
Drange says there will be many opportunities for consumers.
– There is a lot of money in retirement, so there will be a lot of competition around this. Here, as a consumer, you can choose and decline offers.
When choosing a risk for saving your pension, he recommends choosing according to your age.
– Feel free to put a high risk on your pension savings when you are young and focus on filling out your BSU. As you get more experience and get closer to your pension, a lower risk profile may be more appropriate. Pick what you’re comfortable with, says Drange.
