Changes to Norways fiscal code are hoped to provide a boost to long terms savings via funds, according to the regime that takes effect on 1 November.
Confirmed by Norway’s minister of Finance Siv Jensen (pictured above; photo: Rune Kongsro) last week, the new rules mean that Norwegians saving via so-called IPS, or individual pension savings, can save up to NOK40,000 (€4,224) annually – up from NOK15,000 (€1,584) under the ‘old’ IPS regime – and reduce their personal income tax bill by a similar amount annually, while only paying tax on returns once the money is withdrawn at the point of retirement. The new rules are also intended to make it easier for holders of IPS accounts to move their accounts between institutions. Jensen has stated that the regime is intended to foster greater supply of accounts as well as increase competition in the local market for long term savings. (Full details are outlined by the Ministry here in Norwegian only: https://www.regjeringen.no/no/dokumenter/forskrift-om-endring-i-forskrift-19.-november-1999-nr.-1158-til-utfylling-og-gjennomforing-av-skatteloven-av-26.-mars-1999-nr3.-14/id2576599/ )
Bernt Zakariassen, CEO of Verdipapirfondenes forening, VFF, the Norwegian Fund and Asset Management Association, has welcomed the change, noting that with the ageing population and the goal of maintaining standards of living, most people in Norway should consider personal pension savings in addition to the pension that would be acquired through employers.
“Through the introduction of the new IPS regime, authorities have given people a good incentive to save more towards their own pension, and thereby secure economic flexibility as a pensioner.”
The IPS account can be used between the ages of 18-75, and while the assets are locked in the account until retirement, it is possible to start withdrawals from age 62. The new regime means that IPS accounts can be provided by securities funds, banks, life and pensions companies and asset managers. There are no limits on which securities can be used, or any particular diversification requirements, according to VFF.
That said, the Association notes that for those with a long way to go until retirement, consideration ought to be given to equity funds, exposure to which may be reduced as retirement age comes closer. Zakariassen added that given the opportunities now available to save for retirement, for those who can manage to lock away their money until then, there is no reason to hesitate opening an IPS account.