Have you been working in Norway, paid Norwegian National Insurance and are uncertain if you are entitled to any Norwegian pension? And if so, how do you calculate your Norwegian pension? Hopefully, this blog can provide some answers.
First off, the pension system in Norway is roughly divided in three parts.
- Pension from the National Insurance Scheme
- Occupational Pension
- Private savings
Pension from the Norwegian National Insurance Scheme
Your year of birth is the key to unlock the pension entitlements applicable for you.
In 2010/11 Norway renewed the pension scheme, and this reform had an impact on all persons born in 1963 and later. The persons born between 1954-1962, were partly affected. Whilst persons born before 1953 are covered by the old Norwegian pension scheme.
This is the first of 3 blogs related to pensions in Norway and will concentrate on the new pension scheme applicable for the persons born in 1963 or later.
The pension from the National Insurance Scheme consists of income pension and guarantee pension.
Income pension
All persons with pensionable income earned in Norway between the age of 13 and 75 are entitled to retirement pension if they are members of the Norwegian National Insurance Scheme. Even if they only have been members for 1-year.
How much income pension are you entitled to?
The size of the pension is based on your pensionable income accumulated for each year worked in Norway. Note that you can earn pension savings also based on benefits from NAV, i.e., sickness benefit, compulsory military service, care work.
18,1% of the yearly pensionable income up to 7,1G is added to your pension reserves. The G-amount, “Grunnbeløp” is a basic amount that is adjusted every year and it dates back to 1967. For 2023 the basic amount is NOK 118 620.
Pension is saved from the first krone. This means that you can earn pension savings on income up to NOK 842 202 (NOK 842 202 x 7,1G = NOK 842 202). The upper threshold of annual pension savings is therefore NOK 152 438,56 (NOK 842 202 x 18,1%).
The saved pension for each year is accumulated into your personal pension “account”.
Guarantee pension
Guarantee Pension is a guaranteed minimum retirement benefit, granted to those who have low or no earnings toward their pension.
To be entitled to this benefit it is required that you have been a member of the NI scheme for at least five years. To receive full guaranteed pension, you must be a member for 40 years or more. If the total years are less than 40 years, the pension would be proportionately reduced.
The amount of guaranteed pension that you are entitled to depends on your marital status and your Spouse/Partner/Cohabitants annual earnings. If you live with a Spouse/Partner/Cohabitant and their annual income is higher than 2G, you are entitled to guaranteed annual pension based on an ordinary rate.
If you are single or the annual salary to your Spouse/Partner/Cohabitant is below 2G, you are entitled to the highest annual guaranteed pension.
- Ordinary Rate: NOK 210 418
- High-Rate: NOK 237 240
Annual Regulation
During the accumulation phase, your total entitled pension is adjusted annually in accordance with average wage growth. At retirement, the income pension is indexed to annual salary growth less 0,75 percentage points, meaning that the earnings-related pension is linked to an average rise in wages and increases prices in consumption (Inflation)
When can you start to draw a retirement pension?
It is possible to start drawing a retirement pension from the month after you turn 62, however you must be entitled to sufficient pension earnings to do so. From the month you turn 67 there are no such requirements.
And also, it is possible to combine work and receive retirement pension without your pension being reduced.
Life expectancy adjustment
When you turn 61, NAV (Norwegian Welfare Administration) distribute your total pension reserves in accordance with the life expectancy of your age group.
If the life expectancy increases for your age group, you must work longer to obtain the same pension as previous age group.
Life expectancy adjustment is carried out using annuity divisors. The annuity divisors are based on the anticipated life expectancy of people in your age group.
Retirement pension example
Let say that your accumulated pension savings is NOK 3 500 000 and your life expectancy for your age group is 87-years. Then if you decide to draw 100% retirement pension when you are 71 you are entitled of an annual pension of NOK 218 750
(87-71 = 16 year. NOK 3 500 000 / 16 = NOK 218 750)
If you start drawing retirement pension when you are 73-years, then you add on the ordinary pension income for example 100 000 per year then the annual pension amount that you are entitled of is NOK 264 285
(87-73 = 14 year. NOK 3 500 000 + NOK 200 000 = NOK 3 700 000/14 = NOK 264 285)
Your retirement pension from the NI scheme is a life-long payment. Retirement pension will be paid up to and including the month of death.