The Ageing Challenge in Norway

Norway will face a fast maturing old age pension scheme over the 30 next years whereas oil revenueswill supply only a part of implicit liabilities related to the present generation. This working paperexamines 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 pensionreform, crucial elements are still under discussion, among these the decision on a flexible retirementage based on actuarially fair notional accounts and the strength of the link between income andbenefits. Estimated savings arising from strengthened work incentives introducing a longevitycoefficient and less generous indexation are three percentage points of GDP over the long termcompared to an expected nine percentage points of GDP financing gap for welfare spending. For theproposals to have maximum impact, public subsidies to existing early retirement schemes should beremoved 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).