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The Ageing Challenge in Norway: Ensuring a Sustainable Pension and Welfare System

Author

Listed:
  • Benoît Bellone

    (OECD)

  • Alexandra Bibbee

    (OECD)

Abstract

Norway will face a fast maturing old age pension scheme over the 30 next years whereas oil revenues will supply only a part of implicit liabilities related to the present generation. This working paper examines the recently proposed new measures to strengthen long term fiscal sustainability in Norway. Even though a broad agreement was reached in the parliament on the proposed principles of pension reform, crucial elements are still under discussion, among these the decision on a flexible retirement age based on actuarially fair notional accounts and the strength of the link between income and benefits. Estimated savings arising from strengthened work incentives introducing a longevity coefficient and less generous indexation are three percentage points of GDP over the long term compared to an expected nine percentage points of GDP financing gap for welfare spending. For the proposals to have maximum impact, public subsidies to existing early retirement schemes should be removed and eligibility for disability pensions and long-term sick leaves tightened. This paper relates to the 2005 OECD Economic Survey of Norway (www.oecd.org/eco/surveys/norway). Le défi du vieillissement en Norvège : Assurer un système de retraite et de protection sociale soutenable La Norvège va devoir faire face à des régimes sociaux arrivant rapidement à maturité alors que les recettes pétrolières ne couvriront plus qu'une partie des engagements implicites liés à la génération actuelle. Ce document de travail étudie les nouvelles mesures récemment proposées pour renforcer la soutenabilité des finances publiques en Norvège. Si un accord a été récemment conclu au parlement sur les principes d'une réforme des retraites, des éléments fondamentaux sont encore à l'étude, parmi lesquels la decision d'instaurer un âge flexible de départ en retraite basé sur des comptes notionnels instaurant une plus grande équité actuarielle, et de renforcer le lien entre pensions et revenus. Ces dispositions, qui conjuguent des incitations à travailler plus longtemps et une formule d'indexation moins généreuse, permettraient d'économiser l'équivalent de trois points de pourcentage du PIB sur le long terme, alors que les besoins de financement attendus concernant les dépenses sociales s'élèvent à 9 points de pourcentage de PIB. Pour que ces propositions aient un maximum d'impact, il faudrait aussi supprimer les aides publiques aux régimes de retraite anticipée et durcir les critères d'attribution des pensions d'invalidité et des congés maladie de longue durée. Ce document de travail se rapporte à l'Etude économique de l'OCDE de la Norvège 2005 (www.oecd.org/eco/etudes/norvege)

Suggested Citation

  • Benoît Bellone & Alexandra Bibbee, 2006. "The Ageing Challenge in Norway: Ensuring a Sustainable Pension and Welfare System," OECD Economics Department Working Papers 480, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:480-en
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    File URL: http://dx.doi.org/10.1787/600718358800
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    Cited by:

    1. Daniel Leigh & Etibar Jafarov, 2007. "Alternative Fiscal Rules for Norway," IMF Working Papers 07/241, International Monetary Fund.
    2. International Monetary Fund, 2007. "Norway; Selected Issues," IMF Staff Country Reports 07/197, International Monetary Fund.

    More about this item

    Keywords

    congé maladie; disability; fiscal sustainability; incitations au retour à l'emploi; invalidité; Norvège; Norway; pension reform; réforme du système de retraite; sick leave; soutenabilité des finances publiques; work incentives;

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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