AFP, Pension | New AFP pension scheme from the New Year: Here’s what you need to know

From 1 January 2025, an updated contractual pension scheme (AFP) in the public sector will come into force.

This is one of the biggest pension reforms in many years, and will affect almost a million Norwegians.

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What are the new AFP rules?

– The biggest change is that one ranging from receiving an early pension for a maximum of five years, to around the same amount being rolled over into a lifetime pension, says Pensionexpert Steinar Fuglevaag in the Trade Union to frifagbevegelse.no.

The most obvious change therefore is that the AFP payment will now be for life.

Previously, civil servants could take AFP for a limited period of five years before the normal retirement age, but the new scheme means it will last for life.

For workers, this means greater financial predictability after the age of 62, but also new requirements to qualify for the scheme.

Fuglevaag emphasizes that it pays to know the new rules. These are the new terms, taken from KLP.no:

AFP conditions at age 62:

• You must have worked for an AFP employer for at least 7 of the last 9 years before age 62.
• The work must be your main employment with at least 20% work share.
• The income from this work must have been higher than other incomes in the same period.
• You cannot have received a pension, waiting salary or other benefit without a work obligation that exceeds 1.5 G (basic amount) in the last three years before the age of 62.
• You cannot receive disability benefits from NAV after the age of 62.

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AFP conditions upon landing:

• You must have been an employed and active employee of an AFP-affiliated employer in the last three years prior to withdrawal, with a minimum placement of 20%.
• Sick leave can be up to 78 weeks, and other absences are allowed up to 26 weeks, as long as it is not at the beginning or end of the three years.
• You can take out an AFP even if you have been suspended, as long as certain conditions are met.
• Annual income must be at least 1 G at the time of withdrawal, and in the previous year the income must be higher than the average base amount.
• You must not have received an AFP from the private sector, an early retirement pension, or a contractual work pension from the public sector.

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Why is AFP longevity important?

The new scheme provides an opportunity for a more secure economy during retirement, and can be particularly important despite rising living costs.

Financial security after age 62 is a long-awaited development, especially for those who do not have significant savings.

Statistics Norway (SSB) have documented that economic inequality among the elderly in Norway has increased over the past ten years. Norwegian statistics show that although many older people have good finances, income inequality among people aged 55 and over has increased during this period.

A lifetime AFP can help bridge this gap for many public sector workers by ensuring a stable and predictable income during retirement.