It is the Pensions Commission, which presented its recommendation this week, that has arrived at the figure. As an "alternative" to implementing their tightening proposal, they have thus come up with the amount you and I would have to pay in extra annual tax, if the current National Insurance were to be continued.
- The amount is slightly in excess of the Conservative Party's tax promises for this parliamentary term, LO economist Stein Reegård points out to Ny Tid. He is admittedly unsure whether the amount the commission has arrived at is less than the real need for coverage, but believes the figure of 15.000 illustrates that the pension future is not as bleak as some people would like it to be.
- To illustrate it in another way: The figure corresponds to an increase in the employer's contribution of seven to eight percent, to 22 percent. It is still significantly lower than in Sweden, where the employer's contribution is 32 percent, Reegård points out.
- Slow revolution
Although the LO economist believes the figures illustrate a black paint of the situation, he still thinks that the pension challenges should be solved in other and better ways than just raising the level of tax or employer tax. What is important to him is that we are in fact uncertain about the size of the dimensions, ie the challenges facing the Norwegian pension system by 2050.
- Then we should not take everything at once, but rather put regulation mechanisms in the system, Reegård says: – One is that you can regulate the National Insurance basic amount. The second is the Pension Commission's proposal for a division figure.
This proposal, which LO supports, means that you divide the earned pension by the number of years each cohort is expected to live. This means that the pension will be somewhat lower if life expectancy increases, while it will be higher if life expectancy decreases. From the state's side, the expenses will thus be approximately the same per person – provided that people live as long as is "expected" from them.
- The point is that such mechanisms can be made less automatic than what the Pension Commission proposes. The system should rather be changed along the way, when you see the need. I prefer a slow revolution, says Reegård, who points out that we now have two pension systems to deal with: one for those born before 1951 and one for those born after 1964. Those born between these years get a mixture of the two systems.
- Protects the welfare state
SV Deputy Chairman and Member of the Pension Commission, Henriette Westhrin, agrees that the challenges or the black-painted situation should not be exaggerated, but still believes that a fundamental reform of the pension system is necessary. She has therefore endorsed many of the Commission's proposals, but has launched her own model for how pensions should be distributed among different income groups.
- It is important to realize that the figure of 15.000 in tax increase presupposes that no other welfare schemes are improved, Westhrin points out. She believes that the left must take seriously that even if one were to get a majority for drastic tax increases, it could in the next round mean that people support tax relief parties. The consequence, she believes, could then be that both pensions and other welfare schemes are cut sharply. Therefore, the SV deputy leader believes that austerity is needed. The question is just how to hit.
One of the major measures taken by the Pensions Commission – and which thus gathers support from left to right – is to financially punish those who choose to retire at age 62, and reward those who stay in the job for a long time. This means, among other things, that the scheme with contractual early retirement (AFP) will disappear. The scheme, which currently covers all employees in the public sector and 60 per cent of the employees in the private sector, means that you can retire at the age of 62 without losing earning pension points.
The Norwegian Confederation of Trade Unions has strongly opposed the proposal to remove the scheme, and Stein Reegård has little faith that the parties in working life will be able to continue it if the state withdraws. Not just because it will be expensive, or because NHO will say no to a continuation – although that is probably also the case.
- But then the whole point of the pension reform disappears. The main grip of the reform is to remove AFP, and the purpose of the reform is to punish those who leave early, he emphasizes. Reegård also points out that the removal of AFP is the very precondition for another of the commission's proposals – namely to change the rules for occupational pensions in the public sector.
- But both the commission's leader, Sigbjørn Johnsen, and the Labor Party leader Jens Stoltenberg have emphasized that the parties in working life can negotiate a new AFP scheme on top of the National Insurance Scheme?
- If people in the commission say this, it means that they regret it. Formally, it is true that the parties can negotiate a new agreement, but in reality it is just loose talk. Then the main idea with the pension reform disappears, says Reegård.
- Tough choice
SV deputy Henriette Westhrin is not among those who regret that the commission wants to remove the AFP scheme, because she believes it is necessary to have a pension system that carries in the future – without the costs will lead to cuts in other welfare areas. However, she has promoted an alternative model in relation to the majority. The model does not differ from the majority either when it comes to AFP, or when it comes to the proposal that all working years should be included in pension earnings. She therefore admits that her attitude will also affect those who do not have the strength to stay in the job for long.
However, Westhrin believes that her model is significantly more social, because people who have had a low income will receive more pension money back when they retire. These are often the same people – often women – who are affected when they retire early.
- But I will not hide that this was one of the toughest political choices I had to make in the commission, says Westhrin.
The main difference between Westhrin's model and the majority's is that the majority operates with a steeper curve for how much pension you get paid, at the same time as you get a reduction at the bottom. Those who earn less than approx. 100.000 per year on average will receive a full reduction with the majority's proposal, while those who earn less than approx. 220.000 will receive a 60 percent reduction. This, Westhrin emphasizes, affects 19 per cent of the working population – but as many as 24 per cent of women against 13 per cent of men.
Instead, Westhrin proposes a basic pension of approx. 100.000 kroner – the same as the majority's guaranteed pension – but that every kroner you earn must pay off. The reduction of the pension thus disappears with her system. According to Westhrin, the consequence is that those with low and medium incomes receive a higher pension, while those with high incomes receive less. – But it also means a much greater stimulus for the low paid to work more. With the majority's proposal, these are rewarded to a much lesser extent, says the SV deputy leader.
- Paint one wall
LO economist Reegård is, however, not much more impressed with SV's proposal than with the majority proposal: – SV's proposal is like painting one wall. They are in favor of a full closure of AFP and a change in the occupational pension scheme, but they will have a nicer distribution profile for the rest. It is small decorations that could have been done within the current system, he says.
The Progress Party's representative in the Pensions Commission has also launched its own variant. It means that the National Insurance Scheme will only guarantee people a basic pension corresponding to the current minimum pension. Otherwise, people must arrange themselves privately – either through individual pension insurance or in negotiations in working life. Although SV's model has little chance of making an impact, there are probably even fewer opportunities for Frp's model.