Activity of EEA pension funds in Norway

General comments

Life insurance companies are major offerers of pension schemes in Norway. Pension schemes are also offered by banks and management companies for securities funds. In the Norwegian legislation pension undertaking is used as a common concept for ordinary pension funds and pension undertakings offering defined contribution pension schemes on a general and commercial basis. In this document however, the term pension fund is used to encompass all institutions covered by the IORP directive, including commercial multi-employers pension funds.

Chapters 7, 8 and 9 of the Act on Insurance of 10 June 2005 no. 44 apply to Norwegian pension funds. The Regulation of 22 September 1995 no. 827 "on Insurance Services and Establishment of Branches of Insurance Companies and Pension Undertakings having their Head Offices in another EEA state", applies to foreign EEA pension funds. The legal basis of the regulation is section 2-4 of the Insurance Act.

The following paragraphs contain an overview of legislation that applies to the activities in Norway of foreign EEA pension funds. It is emphasised that the following overview does not pretend to be exhaustive.

1. General legislation

EEA Pension funds should be acquainted with the following legislations:

1. Act of 16 June 1989 no. 69 on Insurance Contracts with appurtenant regulations apply insofar as they are appropriate. Reference is made to section 10-1 in the Act.
2. Act of 27 November 1992 no. 111 on Choice of Law in Relation to Insurance (to the extent that they are appropriate).
3. Act of 16 June 1972 no. 47 on Marketing.
4. Act of 13 June 1980 no. 24 on Tax Administration, chapter 6. Please be advised that, pursuant to section 6-6 and 6-7 of the Act, pension funds are obliged to submit statements as regards the pension amount etc. to the tax authorities. Questions relating to taxes should be directed to the Ministry of Finance.
5. Act of 10 July 2005 no. 41 on Insurance Mediation and Regulation on Insurance Mediation of 9 December 2005 no. 1421 deal with insurance mediation activities in Norway.
6. Act of 25 June 1999 no. 46 on Financial Contracts and Financial Assignments (Financial Contracts Act). Agreements on loans issued to employees or members of the scheme might fall under this act.
7. Act of 20 June 2003 on measures to combat the laundering of proceeds of crime etc. applies to activities exercised in Norway.
8. Act of 27 June 2008 no 62 on Individual Pension Scheme

It should also be mentioned that Norwegian legislation prohibits a Norwegian insurance broker from receiving commission from insurance companies. The commission is to be paid directly by the policyholder. The prohibition is directed both at the insurance broker and at the insurance company. The prohibition is aimed at preventing doubts as to the independent role of the broker. However, the prohibition does not apply to mediation of insurance contracts issued by EEA insurance companies which ar not established in Norwaym, provided that the commission received from the insurance comapny is transferred to the principal (customer).

A pension fund is obliged at all times, at the request of Finanstilsynet, to provide the information concerning its activities that Finanstilsynet needs in order to perform its supervision in accordance with the legislation applying in Norway.

2. The Norwegian pension law

The following acts with appurtenant regulations apply to occupational pension schemes (in Norwegian only - will later be made available in English):

1. Act 24 March 2000 no. 16 on Defined Benefit Occupational Pension
2. Act 24 November 2000 no. 81 on Defined Contribution Occupational Pension
3. Act 21 December 2005 no. 124 on Compulsory Occupational Pension

The main rules in these acts state that all employees must be included in a pension scheme from the first working day. In addition, an employee who leaves the company without entitlement to a pension starting immediately shall upon termination of membership retain his/her right to a paid up insurance policy or pension capital certificate unless membership at that point has been shorter than 12 months. The pension capital pertaining to the pension scheme may be managed in a specific investment portfolio where the investment risk is carried either by the employees or by the employer. The pension acts contain requirements related to the composition of the asset portfolio and to risk diversification in investment portfolios when the risk is carried by the employees or by the employer. Reference is made to chapter 3 in the Act on Defined Contribution Occupational Pension and chapter 11 in the Act on Defined Benefit Occupational Pension.

Act on Defined Benefit Occupational Pension stipulates requirements to defined benefit schemes and also defined contribution schemes based on biometric risks. Chapter 3 states who may, and who must, be member of the pension scheme. Chapter 4 contains rules regarding the pension qualifying age, minimum requirements as to period of service, rules concerning acquiring of pension and entitlement to a paid up insurance policy upon resignation before the pension qualifying age. Chapter 5 contains provisions on retirement pension, including a principle of proportionality in the pension plan among the members (employees) and upper limits to the benefits.

New legislation permits retirement pension to be withdrawn , when the policyholder is 62 years old.  The retirement benefits shall  when withdrawn before or after the member reaches 67 years old  be recalculated on actuarial technical bases. Chapter 6 and 7 contain rules concerning disability pension and surviving dependent pension. Reference is also made to the comments under point 4 below regarding transfers of paid up policies issued from Defined Benefit Occupational Pension Schemes.

Act on Defined Contribution Occupational Pension regulates defined contribution pension schemes (not based on biometric risks). Chapter 4 states who may, and who must, be members of the pension scheme. Chapter 5 contains rules regarding the contents of the contribution plan including a principle of proportionality among the members (employees) and upper limits for the contributions. Chapter 6 contains rules concerning entitlement to the pension capital accumulated upon leaving the company. Chapter 7 contains rules concerning withdrawal of retirement benefits. New legislation permits retirement pension to be withdrqawn when the policyholder is 62 years old.

Pension funds intending to offer defined contribution schemes for sponsors in Norway shall notify Finanstilsynet, according to a Regulation of 30. June 2006 with legal basis in the Act on Defined Contribution Occupational Pension. The notification shall in accordance with section 4 and 6 in the Regulation contain further information about the product and the composition of the adopted price tariff used for the contribution schemes offered. The same applies to price tariff changes or other changes to the pension schemes product. The notification shall i.a. include a description of the product including a description of a compulsory insurance granting premium exemption during disability relative to the degree of disability.

3. Norwegian legislation concerning the duty to provide information

Legislation in the pension acts on information to the employees
The Act on Defined Benefit Occupational Pension section 2-8 and the Act on Defined Contribution Occupational Pension section 2-7 with appurtenant regulation of 22. December 2000 no. 1413 states what information the employer has to give the employees. The pension fund is obliged to give the employer adequate information in order for the employer to be able to fulfill his information duties towards the employees. The acts now also contains information requirements concerning  keeping of accounts in defined contribution schemes and information concerning the consequences of i.e. the point in time when members decide to withdraw pension benefits from the scheme.

Provisions on information in the Act on Insurance Contracts
Act of 16 June 1989 no. 69 on Insurance Contracts chapter 11, section 19-3 and appurtenant regulations laid down in accordance with section 11-4, apply as far as appropriate. The regulations concern i.a. the insurers' duty to provide information to the insured. The rules of the Act also apply to the relationship between pension funds and their members, to the extent that they are appropriate. Reference is made to section 10-1 in the Act and the Act on Choice of Law in relation to insurance.

Legislation in the Insurance Acts on information to sponsors and members

Keeping of accounts

The Insurance Act section 9-23 and section 10-6, with appurtenant regulations on keeping and statement of accounts apply. This legislation requires the pension fund to open and maintain an account which shall contain accounts for the scheme and the status at 31 December each year. Each year the pension fund shall send the policyholder a statement of account. The provisions also apply to former employees with a paid up insurance policy or a pension capital certificate.

Legislation on information on different elements in the adopted price tariff

Section 9-5 first paragraph in the Insurance Act regarding the contents of the applied price tariff and payment of premiums applies. These provisions require the pension fund to inform the policyholder about the different elements included in the calculation, and other terms or conditions of importance in the calculation of premiums. Reference is made to section 4 below.

Chapter 7 in the Insurance Act: information to members

Section 7-11 in the Insurance Act and Chapter 12 in the Regulation of 30. June 2006 nr 869 concerning information requirements to members and pensioners apply. This legislation is based on the IORP directive and supplements the above mentioned provisions in the pension acts and the Act on Insurance Contracts.

4. Further provisions in the Insurance Act which apply to foreign EEA pension funds

The Regulation of 22 September 1995 no. 827 on Insurance Services and Establishment of Branches of Insurance Companies and Pension Undertakings having their Head Offices in another EEA state, applies to pension funds. According to section 10 (c. section 8a) of the said regulation, the following provisions of the Act on Insurance with appurtenant regulations apply to pension funds carrying out activities in Norway:

Transfer of funds accumulated under a pension scheme

Chapter 11 in the Act on Insurance (excluding section 11-14, sixth paragraph second sentence) applies. This legislation entitles the employer (policyholder) to transfer a pension scheme contract. The right to transfer a contract implies the transfer of the accumulated funds under the contract to another pension fund, life insurance company, bank or management company for securities funds. However, a transfer according to the act implies only termination of the contract and transfer of the corresponding assets to an equivalent contract established in another pension institution. This means that the receiving pension institution must be authorised to engage in a type of pension activity similar to the pension scheme which is to be transferred. Pension schemes based on biometric risk can therefore not be transferred to a bank or management company for securities funds. Furthermore, Finanstilsynet anticipates that the right to transfer requires the receiving pension institution to have filed a notification of cross-border activity into Norway.

The right to transfer applies to a former employee with a paid up insurance policy or a pension capital certificate.  Accordingly a paid-up policy can be transferred from one pension institution (life insurance undertaking or pension fund) to another life insurance company, within the EEA jurisdiction. Section 11-13 section one regulates the transfer of a paid-up policy derived from an occupational pension scheme. A paid-up policy derived from a defined benefit scheme must in principle conform to the Norwegian Defined Benefit Pensions Act. It is the understanding of Finanstilsynet that this implies that after a transfer the policy conditions must be largely met by the new pension institution which again implies that all the benefits in the policy must be the same in the contract with the new life insurance company. A policy with life annuity cannot for instance be converted into a policy with limited benefits and neither to a contract with investment choices where the policyholder bears the investment risks. New legislation however permits retirement pension to be withdrawn from the policy , when the policyholder is 62 years old . A situation might occur when the accumulated funds transferred are not sufficient in relation to the calculation bases for the provisions for liabilities in the receiving company. Finanstilsynet has to amplify that it is a precondition where paid up policies from a defined benefit pension scheme is concerned, that the policyholder should not be required to pay additional premium when transferring a policy to a new life insurance company. 

Unreasonable premiums and insurance terms

Section 6-7 second paragraph, Section 9-4, Section 9-5 first paragraph and Section 9-6 third paragraph of the Insurance Act apply to pension schemes offered in Norway. Sections 6-7 and 9-6 third paragraph prohibit the use of unreasonable (high) premiums and unreasonable insurance terms. Section 9-4 concerns changes to premiums and states that the pension fund may change the premium and shall in that case set the date on which the new premium shall take effect. Furthermore the pension fund may implement any change before the first ordinary premium due date and at least four months after the policyholder has been informed of the change. Section 9-5 first paragraph concerns information on the content of the different elements included in the premium.

Profit accumulated in life insurance (pension schemes included)

The Insurance Act section 9-9 and 9-12 (see also section 7-10 and 8-3) apply to the extent that these issues are not regulated in the home state. These provisions deal with the policyholder's right to a share of the accumulated profit in accordance with the individual contract’s contribution to the creation of profit. However, these provisions do not apply if the insurance contract is a contract "without profit" or a contract mentioned in article 25 of Directive 2002/83/EC (unit linked insurance). The right to a reasonable share of the company’s profit shall nonetheless be shown in the insurance terms, unless the terms specifically provide that the insurance does not confer a right to a share of the profit. Regulation of 22 September 1995 no. 827 section 10 provides further rules related to this issue.

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Some comments to the legislation mentioned under section 2 to 4 above

The Norwegian pension acts must be interpreted in the light of the EU general good doctrine and the home state’s exclusive right to regulate financial conditions. On the other hand some provisions in the Insurance Act with appurtenant regulations are motivated by consideration of protection of the policyholders or the insured, rather than the financial conditions of the insurance company. This is the case for the provisions in chapter 11 in the Insurance Act with appurtenant regulation relevant to the right to transfer a pension scheme with accumulated funds. With regard to foreign EEA life insurance companies, the provisions must also be interpreted in the light of the EU general good doctrine and the home state’s exclusive right to regulate financial conditions.

For instance when the legal provisions on the right to transfer a pension scheme refer to different kinds of technical provisions (premium reserve, supplementary provisions, fluctuation reserves, claims provisions, risk equalisation fund) the law only addresses what kind of provisions are to be transferred. The actual types and size of the technical provisions are determined from the legislation in the home country of the insurance company. A situation might occur when the accumulated funds transferred are not sufficient in relation to the calculation bases for the provisions for liabilities in the receiving company. In this case, according to section 11-10 third paragraph in the Insurance Act, the policyholder must make a contribution in order to finance the insufficient provisions. The requirement in this case is directed towards the policyholder, and it is not the intention to regulate the (technical provisions as such in the foreign EEA insurance company. Reference is however made to the provisions concerning accumulated profit. As mentioned above there is an exception regarding transfer of paid up policies from a defined benefit pension scheme.   

5. Provisions in the Financial Institution Act

According to the Regulation no 827, some provisions in the Act of 10. June 1988 nr 40 on Financial Institutions (and appurtenant regulations) apply to the activities in Norway of foreign EEA pension institutions.

The relevant provisions are laid down in section 2-7 (on cooperation agreements), section 2-11 (on the duty to disclose information on prices and product packages), section 2-12 (on the duty to disclose information to borrowers), section 2-12a (on loan agreements with consumers etc.) and section 2-14 (on product packages etc.).

If a pension fund is subject to corresponding provisions under the legislation of its home state, the Ministry of Finance may grant exemption from the above mentioned provisions.