Statutory Old Age Pension Scheme as Part of the National Insurance System

Mandatory insurance

• Every individual who is resident in Norway (residence is defined as having intended residence in Norway of more than 12 months).
• Individuals who are employees in Norway or on the Norwegian continental shelf in relation to the extraction of natural resources.
• Individuals working in Svalbard or Jan Mayen.
• Norwegian citizens employed by the Norwegian state and stationed overseas (embassies, IOs etc.).

Opting out

• Individuals resident in Norway employed by a foreign state.

Voluntary insurance

• Individuals who are resident in Norway but not mandatory members can apply to become members of the national insurance system.
• The same applies for individuals resident outside of Norway, if they are working for a company registered in Norway or studying abroad.
• In deciding on applications for voluntary membership of the national insurance system, the authorities will factor in previous periods of membership as well as the overall feasibility of membership and the applicant’s attachment to Norwegian society.

General finances

• PAYG-financed through social security contributions and state contributions from the general budget. (In 2019, the national insurance system was financed by 2/3 through social security contributions and 1/3 through state contributions.) 

Contribution rates to mandatory insurance¹

• Fixed share of monthly gross income without contribution assessment ceiling; no contributions need to be paid for incomes below NOK 54,650. 
• Employees pay 8.2% of income in social insurance contributions, of which roughly 3.1% are allocated to pensions.
• The employer’s social contribution varies regionally, and is up to 14.1% (total).
• The self-employed pay 11.4% (total).

Contribution rates to voluntary insurance

• For voluntary members, the contribution rate for the national insurance system depends on whether the employer has to pay contributions.
• The maximum contribution rate² in cases of employer contribution is 28.6%; the maximum contribution rate without an employer’s contribution is 37.8% of income.

• The Norwegian National Insurance Administration’ (NAV).

Qualifying conditions

Income pension

• Individuals need to have been members of the national insurance system for at least three years in order to qualify for old age pension.
• Retirement age is flexible (62-75 years). 
• If retiring before 67, the accumulated pension at the time of retirement must amount to at least the level of a ‘guarantee pension’ when the individual reaches 67, calculated on the basis of expected wage growth.

Guarantee pension

• Individuals need to have been members of the national insurance system for at least three years in order to qualify for old age pension.
• The ‘guarantee pension’ is tested against the ‘income pension’; to qualify for a ‘guarantee pension’, 80% of the ‘income pension’ has to result in a pension below the statutory minimum pension level.
• Retirement age is 67 with 40 years of residence in Norway (required for full ‘guarantee pension’).

Early retirement

• No options for early retirement available before the age of 62.

Deferred retirement

• Retirement age is flexible, pension can be accessed between the ages of 62 and 75. Pensions have to be claimed from the age of 75. 
• Individuals who stay in work continue to increase their pension based on the principle of actuarial neutrality.

Combining employment & retirement

• Termination of employment is not a precondition for claiming pension benefits.
• It is possible to work at the same time as receiving a pension.
• While individuals can remain in work after the age of 75, they will no longer add to their pension entitlements after reaching 75.
• Old age pension can be drawn at levels of 20, 40, 50, 60 and 80%. 
• Degree of pension receipt can be changed once per year; decision to halt pension or increase to 100% can be taken at any time.

Pension benefits

Income pension

• Primarily based on the amount of life-time earnings between the ages of 13 and 75.
• Pension can also be accumulated during military service, care periods, parental leave and unemployment. 
• Maximum pension amount: only earnings of up to an amount of 7.1 G³ per annum are considered in benefit calculation. 

Guarantee pension

• Pension-tested, flat-rate pension benefit (as determined by statutory minimum pension level) for those with insufficient levels of ‘income pension’.

Benefit calculation

Income pension

• Pension accrual of 18.1% of pensionable income up to a ceiling of 7.1 G is added to accumulated individual pension entitlement accounts (pensjonsbeholdningen) each year. 
• The accumulated entitlements are adapted once yearly to wage growth and, upon retirement, are indexed to annual wage growth minus 0.75%.
• The individual pension benefit is adjusted to the age at which an individual applies for their pension and to cohort life expectancy (levealderjustering), determined for each cohort at the age of 61.

Guarantee pension

• Full flat-rate pension for those with 40 years of membership in the national insurance system; proportionate shortening for shorter residence periods.
• Two different levels: ordinary and high (depending on household income situation).
• Benefit level (= the statutory minimum pension level) is determined once yearly. 
• Indexed to annual wage growth reduced by 0.5%.
• Adapted to cohort life expectancy (levealderjustering), determined for each cohort at the age of 61.
• For individuals living in a state-run care home with free food and residence, the pension is reduced, but will be at least at the level of 22.5% of the ‘guarantee pension’.
• For individuals serving a prison sentence, no old age pension is paid unless an individual has to pay child support.

Taxation and social security contributions

• Pensioners pay reduced social security contributions (5.1%, compared to 8.2% for employees). 
• All pension income is subject to taxation; a tax reduction of up to NOK 30,000 is granted to pensioners.
• Due to the tax deduction, recipients of the ‘guarantee pension’ often do not pay tax.