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Flexible retirement in Norway

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Abstract and Figures

In 2011 Norway implemented a major pension reform – arguably the most important pension reform in Norway since the 1960s. This paper gives a brief overview of the main components of the reform and its effects on labour supply and labour force participation so far.
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1
Flexible retirement in Norway
Workshop “Flexible retirement following the Scandinavian Model”
December 1st 2014, German Bundestag
Senior Researcher Tove Midtsundstad
Fafo Institute for Labour and Social research
Oslo, Norway
2
In 2011 Norway implemented a major pension reform arguably the most important pension reform in
Norway since the 1960s. This paper gives a brief overview of the main components of the reform and its
effects on labour supply and labour force participation so far.
The paper is organized in three separate parts. First I give a brief overview of the pension system before
the 2011 reform. In the second part I explain the main principles in the new pension system, with special
emphasis on the new flexible old age pension, and finally I refer some statistics and analyses that show the
effect of the reform on labour supply and labour force participation so far.
1. The Norwegian pension system before the 2011 reform
The Norwegian pension system is a three pillar system where the NIS (National Insurance Scheme) old age
pension has traditionally been the main source of income for most people in old age. All Norwegian citizens
was (and still are) guaranteed a minimum pension if they have been living in the country for 40 years or
more, whether they were (are) in work during that period or not.
For those who had been in work, the 20 highest income years determined the size of the supplementary
NIS pension, and it took 40 years to earn a full old age pension.
In addition, all public sector employees and about half of all private sector employees were covered by an
occupational pension scheme. Until 2001 these pension schemes were only defined benefit schemes both in
public and private sector
1
. In the public sector the occupational pension schemes was (and still are)
defined benefit schemes, and a full pension after 30 years of insurance (together with the statutory
pension) corresponds to 66 per cent of the pensionable wage (final salary). In the private sector the
defined benefit schemes, which was the most common occupational pension schemes before 2006,
secured private sector employees an old age pension of between 60 and 70 per cent of their final salary.
The age from which it was possible to draw an NIS old age pension - the statutory retirement age - from 1973
to 2011
2
was 67 for both men and women. However, everyone had (and still has) the right to continue
working up to the age of 70, in accordance with the Work Environment Act (§13-15a). After that age it
was (and still is) up to the employer to decide whether they want the employee to go on working or not
3
.
The age from which it was possible to draw an occupational pension was also 67 years. Although
employees in some occupations had (and still has) the right to draw their occupational pension before that
age, for instance nurses and assistant nurses (from the age of 65(62)) and firemen, police officers and
military officers (from the age of 60(57)). In addition “the 85 years rule” in the public sector, allow
departure three years prior to the retirement age if the sum of age and seniority is at least 85 years. Such
special age limits cover about 30-40 per cent of all employees in the local government sector, police officers
and military officers in the state sector and a few occupations in the private sector, such as pilots, ballet-
dancers, divers etc. The main argument for setting a special age limit is either that the service demands
special capacities/capabilities that are normally weakened as one grows older or that the service or work
itself is so demanding that one cannot be expected to perform it up to normal retirement age.
1
Under a defined-benefit scheme, the pension benefit is fixed, while the employer's expenses will depend on the return on pension
assets and pay levels. Normally, the pension benefit will be defined as a percentage of the employee's pay when he/she reaches
retirement age.
2
The statutory retirement age was 70 years when NIS (folketrygden) was first introduced in 1967. It was reduced to 67 years in 1973
and made flexible, between the ages of 62 and 75 from 01.01.2011.
3
However employers can, in accordance with the Work Environment Act § 15-13, in some cases terminate the employment
contract before the age of 70 years (§13-3). But only if the special age limit is commonly used and as a result well-known among
the companies’ employees and the company have a satisfactory occupational pension scheme (see Gjensidigedommen, High
Court (Rt. 2011 s. 964)).
3
Norway has no statutory early retirement scheme. However, all civil servants (employees in the local
government and state sector) and private sector employees covered by a collective wage agreement
4
, have
since 1989 been entitled to a contractual early retirement pension (AFP pension), which gave them the
opportunity to draw a pension before the age of 67. Drawing an AFP-pension did not reduce the old age
pension from NIS, becoming payable at the age of 67.
Before 2011, AFP benefits in the private sector equaled the old age pension received from the National
Insurance Scheme at the age of 67, as well as a small contractual pension supplement. This is still the case
in the public sector. However, between the age of 65 and 67, benefits in public sector are calculated in
accordance with the occupational pension scheme. This has a guaranteed level ensuring all members with
full qualification (30 years) a pension equivalent to two-thirds of their wage at the time of retirement
(“gross arrangements”).
Since March 1998 an AFP pension may be granted to employees who have reached the age of 62. When
the scheme took effect in 1989 the retirement age was 66 years. The retirement age has later been
decreased several times
5
. From October 1997 it has also been possible to combine a partial AFP pension
with part-time work, for example working 80 per cent while receiving 20 per cent of a full AFP pension.
The AFP scheme does not use funding; instead they apply the pay-as-you-go principle. The AFP scheme
in private sector was (and still is) financed by both the employers and the State. Of the AFP pensions for
persons 64-66 the State financed 40 per cent. However, they do not participate in the financing of AFP
pensions payable to persons aged 62-64.
The rest of the costs were covered by quarterly contributions from the employers per employee, and a
deductible component equal to 25 per cent of the insured person’s annual pension (in the LO-NHO AFP
scheme). Employers then had some incentives to retain older workers (until 2011) as they partly or fully
carry their own AFP-costs, as the costs connected with employees retiring early through AFP were partly
or fully born by the establishments themselves in the private sector.
2. The Pensions system after the 2011 reform
Important features of the Norwegian pension reform are the adjustment of pensions in line with changes
in life expectancy; flexible retirement starting at the age of 62 based on actuarial principles and new
pension indexation rules which came into effect in 2011. Another feature of the reform is a new model for
accumulating pension entitlements. In this model all years with income from age 13 to 75 counts. The
model will be introduced gradually for cohorts born after 1954 and fully for cohorts born after 1962.
As part of the Norwegian pension reform changes have been made both to the NIS old age pension and
disability pension, to the laws regulating occupational pension schemes in the private sector and to the
contractual early retirement scheme (the AFP scheme) in the private sector.
However, in the public sector neither the occupational pension schemes nor the AFP scheme have so far
been adjusted in accordance with the new principles of the NIS old age pension, except the principle of
reducing the yearly pension benefits as average life expectancy increases (but then only for those born
after 1958)
6
, and the new pension indexation rules. It is however expected that changes to public sector
pensions will be an issue debated in the 2016 bargaining round.
4
The AFP scheme covers about half of all private sector employees (Nergaard 2010, Midtsundstad 2004).
5
66 years from 1.1.1989, 65 years from 1.1.1990, 64 years from 1.10. 1993, 63 years from 1.10.1997 and finally 62 years from
1.3.1998.
6
One has earned an entitlement to a maximum pension after 30 years in a full-time position. One can then get a retirement
pension that represents 66 percent of ones salary to the pension fund. This is before the adjustment for life expectancy. The new
pension rules has a guarantee of 66 percent before the adjustment for life expectancy for those born up to 1958. The new rules
for those born after 1958 are not ready
4
The NIS old age pension:
In short, the pension reform will imply a shift to a quasi-actuarial system, seeking to neutralise the
expenditure effect of further increases in life expectancy and strengthen the connection between earnings
and pension benefits. It is supposed that labour supply will be stimulated by lowering implicit tax rates and
by aligning the social and private costs of early retirement.
The NIS old age pension can today be drawn from the age of 62 years, whether the person continues
working or not. Hence, there is the flexibility of combining work and a pension (fully or partly). In other
words, the pension reform allows employees to retire at any time they want after reaching the age of 62
irrespective of whether they continue working or not. The precondition is that the accumulated pension
entitlements exceed the minimum pension level (minstepensjon/garantipensjon
7
), when adjustments
based on changes in life expectancy are taken into account.
The new rules mean that retirement and resignation from work are two independent decisions which no
longer need to be taken at the same time. Continued employment after the age of 62 will also accumulate
increased pension entitlements (up to the age of 75) and thus a higher annual pension when it is finally
claimed. The yearly pension benefit will increase with approximately 5 per cent for each year the pension
withdrawal are delayed. Many will therefore have a strong financial incentive to delay their retirement and
continue work.
The old age pension is also adjusted in line with average life expectancy. This means that if average life
expectancy rises, younger people will have to work a little longer than older people to receive the same
pension. The life expectancy adjustment has been introduced to make sure that the pension system
remains sustainable, and can be seen as a substitute for an increase in the statutory pension age.
Salaries and the cost of living generally go up each year. In order to preserve the value of the earned
pension rights, the old-age pension is adjusted each year. The old age pension is adjusted during the
accumulation period in line with average wage increase in Norway. During the payment period annual
adjustments are made in line with average wage increase and then reduced by 0.75 per cent. Over time this
is expected to result in adjustments in line with average wage and living cost increases.
However, the level of future pension benefits and the opportunity to retire at age 62 in private sector
depend considerably on whether the employee is entitled to both an AFP pension (which covers all public
employees but only half of all private sector employees) and an occupational pension. Hence the
opportunity for flexible retirement is not open to all older workers in the private sector today. For
example, a large number of women in the private sector with low wages, many years in part-time work and
no AFP pension are not entitled to draw a full old age pension from the age of 62. According to NAVs
estimations it is approximately 25 per cent of women in private sector companies with AFP and 60 per
cent of women in companies without AFP that do not have this opportunity today. Some of them may
however be able to draw a partial old age pension at the age of 62, or they have to wait until they reach the
age of 63, 64 or 65.
Although the new retirement scheme is flexible, there are some other limitations too. Employers can, as
earlier mentioned, terminate the employment contract at the age of 70
8
in accordance with the Work
Environment Act 15-13)
9
, and private sector companies with a define benefit (occupational) scheme
can terminate the contract at the age of 67.
7
The minimum pension level (Minstepensjonen/garantipensjonen) is today (from 1.5.2014) equal to NOK 176 736 (or
approximately Euro 20 800) for a single person.
8
There are however some exceptions to this general rule which affect, for example, employees in occupations with a special age
limit and employees in companies with a defined contribution pension scheme, which consequently terminate employment
contracts before the age of 70, typically at the age of 67.
9
This rule was implemented as a part of the Work Protection Law (now the Work Environment Act) in 1972 (Ot. prp.
(Proposition) nr. 17 (1972-73)). Paragraph § 13-15a of the Work Environment Act came into force on the 1st of January 2010.
According to the rule employers can terminate the employment contract at the age of 70 without giving any specific reason. It
does not mean that the contract will be terminated at the age of 70, only that the employer can decide whether or not they want to
terminate the employment contract. This is in contrast to the age limit law in the government sector, where it is mandatory to
leave at the age of 70.
5
The new government has however proposed to increase the age limit in the WEA, first to 72 years, and
later to 75 years; and to either abolish or tighten access to special age limits. The main arguments are that
there has been a huge increase in average life expectancy, that older people are generally in better health,
that the employment rates for those aged 67 and above are increasing and that employees can now
accumulate increased pension entitlements in NIS up to the age of 75.
The Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise
(NHO) do not support these changes. They argue that the number of people who want to work and
actually continue to work after the age of 70 remains low and that it is more important to prevent early
retirement among those aged between 60 and 70.
Occupational pension schemes:
Since 2006 all employers have been obliged to offer their employees an occupational pension
scheme. Mandatory occupational pension (OTP) schemes must include old age pensions and exemption
from payment of contributions/premiums in the event of disablement. The employer can also voluntarily
include other benefits in the pension scheme, for example a disability pension and surviving spouse's
pension.
After 2001, when the law opened up for defined contribution schemes in Norway
10
, and especially after
2006 when the occupational pension was made mandatory, there has been a huge increase in the number
of employees covered by defined contribution schemes. Many employers has also closed their defined
benefit (DB) pension schemes and replaced them with much less generous defined contribution (DC)
schemes. Today in the private sector about 80 per cent of all employees are covered by a DC scheme
11
,
and the most common DC schemes only guarantee that the employer contributes 2 per cent of the
employees income every year, which amounts to a rather small supplement to the NIS old age pension
12
.
The AFP scheme
In addition, the contractual pension (AFP) in the private sector, which is a part of the collective wage
agreements in the sector (and covers about half of all private sector employees), was changed from an
early retirement scheme to a supplementary old age pension in the 2008 bargaining round (and
implemented in 2011).
Prior to this it was only those who actually retired before 67 who received an AFP pension. Today all
employees covered by an AFP scheme are entitled to a lifelong supplementary pension from the AFP
scheme whether they retire early or not. The new AFP scheme in private sector follows the same
principle of actuarial neutrality as the NIS old age pension does. In other words, the yearly benefit from
the AFP scheme will increase if pension withdrawal is delayed. Private sector AFP gives typically an
additional benefit to the public old age pension of slightly above 20% for the entire remaining lifetime.
To receive an AFP pension one has to be working in a company covered by a collective wage agreement
when retiring. In other words, if one moves from a company with an AFP scheme (covered by a collective
wage agreement) to a company without an AFP scheme (not covered by a collective wage agreement) at
for example age 60 or 61 one loses ones right to the AFP pension even if one have worked in a company
with an AFP scheme up to that date.
Other important changes
In July 2008, the opportunity to reduce working hours from the age of 62 years (in the Work
Environment Act) was strengthened. The aim is to enable older workers to remain in employment even if
they do not want to work full time. This is in line with the new NIS flexible retirement scheme, as well as
10
A defined-contribution scheme means that the employer's expenses relating to the pension scheme are fixed, while the pension
benefit depends on the amount paid in and the return on the contributions. In defined-contribution schemes, a minimum of two
per cent of the pay must be deposited in a pension fund, but the employer can choose a better scheme and employees can
contribute by saving for themselves within certain limits.
11
Geir Veland (2014), Tjenestepensjonsmarkedet 20012013 (Occupational pensions in Norway 2001-2013). Fafo-working paper
2014:11. Oslo: Fafo Institute for Labour and Social Research.
12
Jon M. Hippe and Hans Gunnar Vøien (2014), An analysis of future benefits from public and private pension schemes The
Norwegian country study to the OECD pension adequacy project Fafo-report 2014:21. Oslo: Fafo.
6
the revised AFP early retirement scheme, both of which include strong financial incentives to remain in
employment including part-time work beyond the age of 62 years.
Furthermore, Norway’s National Insurance system (NIS) previously provided old age benefits from the
age of 67, but with an earnings test for those aged 67-69. Up to the 1st of January 2008, 40 per cent of
earnings exceeding a threshold were deducted from the NIS old age pension. As part of the ongoing
pension reform the earnings test has been abolished; from 2008 for 67-year-olds, from 2009 for 68-year-
olds and from 2010 for 69-year-olds.
The Tripartite Agreement on a More Inclusive Working Life (IW-agreement)
The declaration of intent to cooperate on attaining a more inclusive labour market (IW-agreement) was
signed on the 3rd of October 2001. The declaration of intent was initially signed for a period of four years
from the 3rd of October 2001 to the 31st of December 2005; it was later extended from 2006 to 2013 and
most recently from 2014 to 2018.
On the basis of the IW-agreement, the government and the main employer and employee organisations
(the social partners) have committed themselves to seeking to establish a more inclusive labour market for
the benefit of the individual employee, the employers and society as a whole. Through the agreement,
focus has been placed on reducing sickness absence and the use of disability pensions and increasing the
retirement age. The goal of the IW-agreement signed in 2013 is to increase the years in employment for 50
years old by 12 months from 2009 to 2018.
The government’s main instruments for reducing labour market exclusion and attrition have included
information and counselling services. These have been provided under the auspices of the NLWAs
labour centres, as well as in the form of support from the Centre for Senior Policy (CSP).
As part of the follow-up to the IW-agreement, in 2004 the government also reduced payroll tax for
workers over the age of 62. The objective was to make it more attractive for employers to recruit and
retain a greater number of older workers. As the effect of this measure appeared to be quite negligible
13
it
was removed from the 1st of January 2007.
While the pension reform identifies the attractiveness of the pension system as a main cause for early
retirement and seeks to counteract early exit by strengthening the financial incentives to remain in
employment, the basic principle of the IW-agreement is that early retirement is an effect of workplace
conditions and therefore needs to be counteracted by individual employers’ policies and initiatives for
retaining older workers.
The importance of formulating a coherent personnel policy for all age groups is increasingly recognized by
Norwegian employers. The share of employers having what we in Norway call a senior worker policy
(seniorpolitikk) have in increased from approximately 6 per cent in 2001 to 68 per cent in 2013.
As a result of the IW-agreement an increasing share of Norwegian companies has also incorporated old
age policy measures into their personnel policy
14
(Figure 1). In 2013, 73 per cent of all Norwegian
establishments with 10 or more employees had introduced measures to enable persons with a reduced
working capacity to continue in employment. 54 per cent reported to have programs preventing health
problems and improving work ability, whereas 30 per cent of the establishments promoted training, life-
long learning, and career development for older employees past the age of 55
15
. Similarly, 37 per cent
reported to have pro-retention programs for older employees above the age of 62.
13
Ellingsen, G. og Røed, K. (2006), Analyse av aldersdifferensiert Arbeidsgiveravgift. Rapport 5/2006. Oslo: Frischsenteret, UiO.
14
Midtsundstad, T. & Bogen, H. (2011), Ulikt arbeid ulike behov. Seniorpolitisk praksis i norsk arbeidsliv. Fafo-report 2011:10.
15
Midtsundstad, T. (2014), Voksende seniorengasjement i norsk arbeidsliv. En virksomhetsundersøkelse fra 2013. Fafo-rapport 2014:30. Oslo:
Fafo Institute for Labour and Social research.
7
Figure 1 Share of Norwegian companies that has incorporated old age policy measures into their personnel policy 2005,
2010 and 2013.
The most common initiatives offered to retain older workers in Norway are less strenuous work,
rearrangement of work tasks, extra days off, shorter working hours without a proportionate wage
reduction, and provision of additional bonuses to older employees who choose to continue working rather
than retire. This was found to be the case in both 2005 and in 2013.
The current studies of the effects of these measures are inconclusive
16
. Preliminary analysis do not find
any effect of these measures so far
17
(Midtsundstad et al 2012a, 2012b), except for extra days off
(Hermansen 2014). One reason may be the types of measures and allocation criteria's chosen.
However, research has shown that the causes of early retirement are complex and are generated by a
number of different factors within, as well as, outside the workplace. The various pull and push factors
also vary in importance for different professions and educational groups. One would therefore assume
that in order to be effective, the initiatives and instruments launched to prevent early retirement need to
vary between professions, industries, and sectors. In Norway today, however, they do not. The options
and the allocation criteria are surprisingly similar across industries and enterprises, despite the
heterogeneity of needs, problems, and challenges. This may be one reason why active aging policies and
the measures chosen by Norwegian establishments are not necessarily effective in reducing early
retirement.
In addition, the costs of the measures offered may exceed the intended gains, as those who would
continue working anyway also are entitled to the senior measures. The same argument goes for labor
supply, that is, whether there will be any additional hours worked or not, as many of those who would
otherwise work full-time now choose to work part-time.
3. Effects of the pension reform so far
Seen from an international perspective, the employment rate among Norwegian older workers is high, and
has been for many years. The largest drop in employment rates was in the period 1980-1995 (Figure 1 &
16
Midtsundstad, T. Hermansen, Å & Nielsen, R.A. (2012) Effects of companies’ initiatives to reduce early retirement among
older workers. Nordic Journal of Working Life Studies, vol. 2, No. 3, s. 89-108.; and Hermansen, Å (2014 forthcoming). «Retaining
older workers The effect of phased retirement on delaying early retirement». Nordic Journal of Social Research.
17
Midtsundstad, Hermansen & Nielsen (2012), Effects of companies’ initiatives to reduce early retirement among older workers.
Nordic Journal of Working Life Studies, vol. 2, No. 3, s. 89-108. Midtsundstad, Nielsen & Hermansen(2012), Tilrettelegging og
seniortitak påvirker det kommuneansattes sykefravær og tidligpensjonering? Søkelys på arbeidslivet 1-2, årg. 29, s. 130-150.
34
59
21
20
42
66
29
30
54
73
30
37
010 20 30 40 50 60 70 80
Programs preventing health problems and
improving work ability
Measures to enable persons with a reduced
working capacity to continue working
Training, life-long learning, and career development
for older employees past the age of 55
Pro-retention programs for older employees above
the age of 62
2013 (N=800) 2010 (N=800) 2005 (N=713)
8
2). Since 1995 there has been an increase in employment rates for all groups above 55 years of age with
the exception of men aged 50-59 years, where employment rates have been stable (Figures 2 & 3).
In Norway in 2010, the main reasons for people aged 50-64 being outside the labour force were illness or
disability (60.9 per cent) and early retirement (22.0 per cent)
18
. An international survey conducted in 2006
among people in the age group 50-69 (who had been employed at least until the age of 50) found that in
the EU-27 61.3 per cent of those who were retired had retired because they had reached the statutory
retirement age or because they wanted to stop working, compared to 48.9 per cent in Norway.
Figure 2 Employment rates for men aged 50-59 years, 60-64 years and 65-74 years, 1980-2012. The Norwegian Labour
force survey.
Figure 3 Employment rates for women aged 50-59 years, 60-64 years and 65-74 years, 1980-2012. The Norwegian
Labour force survey.
Given that a growing number of people in Norway have chosen to combine employment and retirement
since 2011, there is often no longer a correlation between the point at which someone draws a pension
and the point at which he or she stops working. The Norwegian Welfare and Labour administration
(NLWA) has therefore established separate indicators for employment behaviour and retirement
behaviour (drawing a pension) among older people in the form of expected years of employment (Figure
4) and expected retirement age
19
. In 2010, the expected retirement age for a 50 year old was 63.7, which is
0.3 years lower than in 2005 but approximately equal to what it was in 2001 (63.5).
According to statistics from NLWA there has been a huge increase in the number of private sector
employees working after the age of 62 in recent years. While economic activity in general has declined
18
Eurostat (2012), Active ageing and solidarity between generations. A statistical portrait of the European Union, 2012. Luxembourg: EU.
19
O. Haga (2014), Forventet pensjoneringsalder og yrkesaktivitet [Expected retirement age and labour market participation],
Arbeid & Velferd nr. 2, 2014.
9
slightly, this does not apply to workers aged 50 and above for whom the expected duration of economic
activity (full-time employment) has increased from 9.6 years in 2001 to 11.3 years in 2013 (from 7.9 years
to 9.8 years for women, and from 11.3 years to 12.8 years for men) (Figure 4).
Figure 4 Expected years of economic activity at age 50, 2001-2013
20
.
The increase from 2010 to 2013 may be an effect of the pension reform. A very positive increase in years
of employment has been noticeable among older workers since 2011, especially among the 62-64-year-
olds (Figure 4) and this applies for both women and men. The increase has been particularly strong for
those with secondary school as their highest level of education. Furthermore, the increase in the number
of employees who are still working one year after aged 61 was stronger in the private sector (with the
“new” AFP scheme) than in the public sector (with the “old” AFP scheme) from 2011 to 2012
21
(Figure
6).
Figure 5 Percentage of persons aged 60 70 years in employment in the period 31.12.2007 31.12.2013.
20
O. Haga (2014), «Forventet pensjoneringsalder og yrkesaktivitet» [Expected retirement age and labour market participation],
Arbeid & Velferd nr. 2 2014.
21
Claus, G., Nordby, P. & Næsheim, H. (2014) ”Yrkesaktivitet blant eldre før og etter reformen” [Labour market participation
among older people before and after the reform], Report 19/2014, Statistic Norway.
7,9 8,2 8,5 8,8 9,3 9,5 9,8
11,3 11,2 11,4 12,1 12,5 12,5 12,8
9,6 9,7 9,9 10,5 10,9 11 11,3
0
5
10
15
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Women Men Total
10
Figure 6. The probability to continue working among employees aged 62-66. 2009-2013.
Analysis by NLWA
22
based on register data on retirement behaviour and employment from 2001-2012
supports these findings. For a reference person in these analyses (i.e. a Norwegian born, male, 64 years,
with no children under the age of 12, no parents alive, who have worked for 30 years or more in the
private sector, and have a spouse still working etc.), the probability of still being employed after one year
increases if he works in a private sector company with an AFP scheme.
Furthermore, NLWA
23
found that although almost 45 per cent of those with the opportunity to draw an
old age pension before the age of 67 did so; two out of three of these pensioners continued working. As a
result the number of older people aged 6266 in employment increased from 39 per cent in the 2010 to 42
per cent in 2012. The increase was especially high in private sector companies with an AFP scheme, and
among blue collar workers and those with primary school as their highest educational level.
In addition, the number of retirees from companies with an AFP scheme has decreased from 24 per cent
in 2009-2010 to 15 per cent in 2011-2012 among workers aged 62-66. Furthermore, pensioners aged
between 62 and 66 continue working almost as much as they did prior to taking up their pension benefits.
Of those combining work and the old age pension, over 80 per cent work at least 30 hours per week.
These finding are supported by more sophisticated analyses comparing changes in employees’ probability
of employment after the age of 62 in private and public sector companies with different AFP schemes
from 2008 to 2012, using a difference-in-differences approach
2425
. The author find that there has been a
statistically significant higher increase in the probability of continuing working for a 61 years old in private
sector companies with the new AFP scheme, compared to those in the public sector with the old AFP
scheme. However, the employment rates of older public sector employees aged 62 (at least in the local
22
Bråthen, M. and F. Bakken (2013). Arbeid eller pensjon? En studie av hvilke faktorer som påvirker seniorenes beslutning om å fortsette i jobb?
NAV-rapport 2013:1. Oslo, Norwegian Labour and Welfare Administration.
23
Dahl, E. H. and O. C. Lien (2013). "Pensjonsreformen - flere eldre i arbeid." Arbeid & Velferd(1): 58-70. Oslo, Norwegian
Labour and Welfare Administration.
24
Røed, K. (2014), «Arbeidslivet etter pensjonsreformen», presentation at a meeting of the Pension forum on the 14th of March
2014, Oslo: Ragnar Frisch Centre for Economic Research.
25
Midtsundstad, T. & Nielsen, R. (2014), Arbeid og pensjon i kommunal sektor. Fafo-rapport 2014:45. Oslo: Fafo Institute for
Labour and Social Research.
11
governmental sector) were higher than in the private sector before the reform. So currently the rates are
the same in the private and public sector.
26
The new flexible old age pension may lead to increased use of different health-related benefits (such as
sickness absent benefits and disability benefits) among persons aged 62-66, especially in the private sector.
However, according to NLWAs analyses
27
the use of health-related benefits has decreased among both
private and public sector employees in the relevant age groups in the period 2010-2013.
NLWA
28
has also investigated why so many older employees have chosen to combine the new flexible old
age pension with work. They found that men and lower educated have a higher probability of combining
work and old age pension than women and higher educated. Those who expected to have a lower life
expectancy than the average also have a higher probability to combine work and old age pension. The
main reason given by 90 per cent was that they wanted to enjoy their pension when still healthy and in
good shape. Over 70 per cent also claimed that it was economic profitable to withdraw the pension early.
40 per cent also claimed that drawing the old age pension gave them an opportunity to reduce weekly
hours worked. However, only 25 per cent had actually reduced their working hours, although many plan
to do so in the nearest future. On the other hand, one out of three planned to work until the age of 67.
There has also been a 10 per cent increase in weekly average working hours for employees aged 67-70 in
the period 2008-2013
29
; from 27 to 29 hours per week for men and from 20 to approximately 22 hours for
women. The reason may be that income from work no longer reduces the old age pension for those above
67, a change that was implemented during the period 2008-2010 (in 2008 for those aged 67, in 2009 for
those aged 68 and in 2010 for those aged 69).
The positive effect of changes to the old age pension on employment rates among those aged 67 and
above are also documented by NAV
30
. They found that the changes had an effect on older workers
labour market participation: the probability of a person aged 66 working at the age of 67 increased by 4
per cent point from 2007 to 2008. However the effect varied with individual characteristics and industry.
Some have also studied
31
changes in incentives to work offered to 67-69 year olds; both the above
mentioned earnings test reform (which increases current earnings from work), and a pension system
maturation (which increases pension accrual from work). Within a difference-in-differences framework,
they investigate the effects of these economic incentives and find that the earnings test reform has
significant effects, while pension system maturation has no significant effects. The findings confirm that
67-69 year olds do adjust their work efforts when there are economic incentives but are only motivated to
do so by incentives affecting their current income and not those affecting their future pension.
Summary (conclusions)
Older Norwegian employees seem more willing to work longer that earlier; especially private sector
employees covered by an AFP scheme.
However, only 50 per cent in private sector (and about 23 per cent of all employees) has these fully
flexible retirement opportunity today.
26
Midtsundstad, T. & Nielsen, R. (2014), Arbeid og pensjon i kommunal sektor. Fafo-rapport 2014:45. Oslo: Fafo Institute for Labour
and Social Research.
27
Jacobsen, O. (2014), Pensjonsreformen: hvilken innvirkning har den hatt på bruken av helserelaterte ytelser? (The Pension
Reform: How does the reform affect the use of health-related benefits?). Arbeid & Velferd 2014(4). Oslo: Norwegian Labour and
Welfare Administration.
28
Galaasen, A.M. og Dahl, E. S. (2013), Ja, takk begge deler? En spørreundersøkelse om arbeid og pensjon. NAV-rapport 2103:11. Oslo:
Norwegian Labour and Welfare Administration.
29
Claus, G., et al. (2014). Yrkesaktivitet blant eldre før og etter pensjonsreformen. Rapport 2014/19. Oslo, Statistic Norway.
30
Bråthen, M. and A.-C. Grambo (2009). "Sysselsettingseffekten av endrede regler for alderspensjon for 67-åringer." Arbeid &
Velferd 2009(2). Oslo: Norwegian Labour and Welfare Administration.
31
Brinch, C. N., et al. (2012). Labor supply on the eve of retirement. Disparate effects of immediate and postponed rewards to working. Discussion
papers no. 698. Oslo, Statistics Norway. Research department.
12
Furthermore, pensioners aged between 62 and 66 continue working almost as much as they did prior to
taking up their pension benefits. Of those combining work and the old age pension, over 80 per cent work
at least 30 hours per week.
There also been a positive effect of changes to the old age pension on employment rates among those
aged 67 and above. The reason may be that income from work no longer reduces the old age pension for
those above 67, a change that was implemented during the period 2008-2010.
The use of health-related benefits has decreased among both private and public sector employees in the
relevant age groups in the period 2010-2013. One reason may be increased emphasizes on health
promotion and measures to retain older people with health problems in working life, due to the IW-
agreement.
The importance of formulating a coherent personnel policy for all age groups is also increasingly
recognized by Norwegian employers. The share of employers with what we in Norway call a senior
worker policy (seniorpolitikk) have in increased from 6 per cent in 2001 to 68 per cent in 2013. An
increasing share of employers has also incorporated different old age policy measures into their personnel
policy. However, the increase in companies with senior worker policy and pro-retention programmes are
mainly a result of the IW-agreement; not the pension reform.
Article
Full-text available
Streszczenie. Proces starzenia się ludności i jego ekonomiczno-finansowe skutki sprawiają, że poszukuje się rozwiązań, które pozwolą utrzymać aktywność zawodową pracowników. Dłuższe okresy pracy są korzystne dla stabilności systemów emerytalnych, a jednocześnie przyczyniają się do uzyskiwania wyższych świadczeń emerytalnych. Pomimo sukcesywnych reform systemów emerytalnych w wielu państwach UE efektywny wiek emerytalny pozostaje na niższym poziomie niż wiek powszechny, a okresy zatrudnienia nie wzrastają w oczekiwanym tempie. Podwyższanie wieku emerytalnego ma ekonomiczne uzasadnienie wtedy, gdy większość pracowników będzie w stanie pracować do jego ukończenia. Jak wynika z badań prowadzonych w niektórych państwach europejskich, rezygnacja z pracy w ogóle lub w pełnym wymiarze czasu jest spowodowana problemami zdrowotnymi lub wynika z niepełnosprawności. W systemach emerytalnych 15 państw członkowskich UE oraz w Norwegii stosowane są rozwiązania, które pozwalają na elastyczne przechodzenie na emeryturę, m.in. umożliwiając łączenie pracy w obniżonym wymiarze czasu z pobieraniem emerytury częściowej. Skuteczność i efektywność stosowanych obecnie rozwiązań jest niejednoznaczna, co wynika z ich dużego zróżnicowania konstrukcyjnego, a także ze specyfiki rynku pracy w poszczególnych krajach. Wydaje się jednak, że zainteresowanie rozwiązaniami takimi jak emerytura częściowa będzie wzrastać, albowiem mogą się one przyczynić do wydłużenia okresu aktywności zawodowej przynajmniej niektórych grup pracowników. Słowa kluczowe: zatrudnienie, emerytura częściowa, efektywny wiek emerytalny. Kody JEL: J32, J38, H55.
Arbeid og pensjon i kommunal sektor. Fafo-rapport
  • T Midtsundstad
  • R Nielsen
Midtsundstad, T. & Nielsen, R. (2014), Arbeid og pensjon i kommunal sektor. Fafo-rapport 2014:45. Oslo: Fafo Institute for Labour and Social Research.
Pensjonsreformen: hvilken innvirkning har den hatt på bruken av helserelaterte ytelser? (The Pension Reform: How does the reform affect the use of health-related benefits?)
  • O Jacobsen
Jacobsen, O. (2014), Pensjonsreformen: hvilken innvirkning har den hatt på bruken av helserelaterte ytelser? (The Pension Reform: How does the reform affect the use of health-related benefits?). Arbeid & Velferd 2014(4). Oslo: Norwegian Labour and Welfare Administration.
Yrkesaktivitet blant eldre før og etter pensjonsreformen
  • G Claus
Claus, G., et al. (2014). Yrkesaktivitet blant eldre før og etter pensjonsreformen. Rapport 2014/19. Oslo, Statistic Norway.
Sysselsettingseffekten av endrede regler for alderspensjon for 67-åringer
  • M Bråthen
  • A.-C Grambo
Bråthen, M. and A.-C. Grambo (2009). "Sysselsettingseffekten av endrede regler for alderspensjon for 67-åringer." Arbeid & Velferd 2009(2). Oslo: Norwegian Labour and Welfare Administration.
Labor supply on the eve of retirement. Disparate effects of immediate and postponed rewards to working. Discussion papers no. 698. Oslo, Statistics Norway
  • C N Brinch
Brinch, C. N., et al. (2012). Labor supply on the eve of retirement. Disparate effects of immediate and postponed rewards to working. Discussion papers no. 698. Oslo, Statistics Norway. Research department.