How do we look at retirement

Baby Boomers – Generation X – Millennials – Generation Z – Generation Alpha

We have two pension schemes in Norway; “Defined contribution benefit” (innskuddspensjon) and “Defined benefit pension” (ytelsespensjon).

NINA IVARSEN, CHAIR VEFF

Defined Contribution Pension (Innskuddspensjon)

Since January 1st, 2005, all new employees enter the Defined Contribution Pension scheme. Also, employees who chose to convert from “Defined Benefit Pension” at this time, are enrolled in this scheme.

Pension contribution is paid by DNV into your personal pension account at Nordea, where you are encouraged to take an active part in the investment profile to maximize your pension savings.

An annual contribution is paid as follows: 5% base salary between 0 - 7,1 G 15% base salary between 7,1 - 12 G

If you work part-time, the contribution is a pro rata share of the amount that would have been paid for a full-time position. The balance in your pension savings account is managed by the pension supplier and will be converted into a pension payment when you start withdrawing your pension.

The yearly contribution will vary each year depending on your salary and the development of the Norwegian base amount (G).

Return on investments on Defined Contribution scheme

Your employer paid pension will consist of the sum of contribution and the investment return. With a long timeline it is very important how the funds are managed, as this will determine how much you will receive in pension.

Defined Benefit Pension (Ytelsespensjon)

This pension scheme only applies to employees hired before 2005. The scheme is provided by the DNV Pension fund and is managed by Lumera AS from July 1st 2016. The defined benefits level is 66% of the final salary level, assuming at least 30 years of service, deducted the calculated pension from the Norwegian insurance scheme (“Folketrygden”). See OP-NOR-8-7 for details.

The actual pension from the Norwegian insurance scheme will deviate from the calculated pension, and no private pension schemes takes into account this difference.

Retirement age and pension withdrawal

From the year in which you reach the age of 62 you may choose to start drawing your pension. You can combine pension withdrawal with continued work. If you go on working, you will continue to build up pension rights.

On the 1st of July 2015 the age limit for termination of employment in the Norwegian Working Environment Act (arbeidsmiljøloven) was raised. As a result of this, DNV Norway decided to raise the age limit in the company to 70 years.

AFP - avtalefestet pensjon

AFP is an ungraded lifelong supplement to the retirement pension from the National Insurance scheme (Folketrygden). AFP is a collectively agreed pension scheme in the private sector.

You must be born after Feb 16th, 1957, to qualify for AFP, because DNV signed the AFP tariff agreement On Feb 16th, 2012. If you have moved from another company affiliated to the AFP scheme, you may still be eligible.

The principal rule is that for seven out of the last nine years before you reach the age of 62 you must have worked for one or more companies affiliated to the AFP scheme for Fellesordningen, Spekter or FA.

BABY BOOMERS

(BORN 1946 TO 1964)

Emerging from the pandemic, Baby Boomers approaching retirement are susceptible to employment risks, volatility in the financial markets and increasing inflation—all of which could disrupt their retirement plans.

Almost half of Baby Boomer workers (49 percent) expect to work past the age of 70, are already doing so or do not plan to retire. However, these plans depend on support from employers. Just 59 percent of workers from this generation say their employer is age-friendly, as evidenced by actions such as offering opportunities, work arrangements, training and tools needed for employees of all ages to be successful.

GENERATION X

(BORN 1965 TO 1980)

Only 22 percent of Generation X workers are “very” confident they will be able to fully retire with a comfortable lifestyle and just 28 percent “strongly agree” they are building a large enough retirement earning. Seventy-eight percent are concerned that Social Security will not be there for them when they are ready to retire.

Generation X workers seek to extend their working years, so they have more time to save. Thirty-eight percent expect to retire at age 70 or older or do not plan to retire, and 55 percent plan to work in retirement.

“The oldest Generation Xers are now in their late 50s and the youngest are in their early 40s, so there is no time like the present to build their savings and create long-term financial plans,” Collinson said.

MILLENNIALS

(BORN 1981 TO 1996)

Millennials entered the workforce around the time of the Great Recession, which began in late 2007. They experienced a turbulent economy in their early working years. They started their careers with higher levels of student debt than previous generations. Millennials have waited to buy homes, get married and start families, but with the increasingly widespread availability of 401(k) plans, they made a solid and early start in saving for retirement.

Seventy-three percent are concerned that Social Security will not be there for them when they are ready to retire.

GENERATION Z

(BORN 1997 TO 2012)

The pandemic has been especially difficult for Generation Z workers. Fifty-one percent said they often have trouble making ends meet. Yet, they have not given up on retirement—67 percent of workers from this generation are saving through employer-sponsored 401(k)s or similar retirement plans, and they started saving at the unprecedented young age of 19 (median).

Employers can “help workers protect their health and finances and facilitate saving and investing for retirement,” Collinson said, “and the private sector must continue innovating products, services and solutions that can help people live, work, save and retire better. We’re all in this together.”

Source: Navigating a New Era of Financial Wellness, Bank of America, 2022. Created with Datawrapper

GENERATION ALPHA

Generation Alpha (or Gen Alpha for short) is the demographic cohort succeeding Generation Z. Researchers and popular media use the early to mid-2010s as starting birth years and the mid-2020s as ending birth years. Named after the first letter in the Greek alphabet, Generation Alpha is the first to be born entirely in the 21st century. Most members of Generation Alpha are the children of Millennials and younger Generation X.

Generation Alpha has been born at a time of falling fertility rates across much of the world. Children’s entertainment has been increasingly dominated by electronic technology, social networks, and streaming services, with interest in traditional television concurrently falling. Changes in the use of technology in classrooms and other aspects of life have influenced massively how this generation has experienced early learning compared to previous generations. Studies suggest that allergies, obesity, and health problems related to screen time have become increasingly prevalent among children in recent years. The COVID-19 pandemic has been a significant event in the lives of Generation Alpha.