How to define a "minimum pensioner" in the reformed National Insurance scheme

This concept has been particularly relevant because it has been determined politically, and the level has thus served as a lower threshold for what has been considered an adequate income for pensioners. Before the 2011 pension reform of the National Insurance scheme, a significant number of pensioners were minimum pensioners. After the reform, however, almost all new pensioners will receive a benefit exceeding the minimum amount, which is now called a ”‘guarantee pension”. However, this change does not necessarily improve purchasing power, either in absolute or relative terms.

At the same time, there is a political desire to quantify the issue of low income among the elderly, which creates a need for new concepts to describe pensioners with low income under the new National Insurance scheme. In this report, we discuss alternative concepts for describing pensioners with low incomes under the new system. A natural choice is to adopt a poverty or low-income measure aligned with the official statistics for low income in Norway. The advantages of such a definition are that it measures income relative to the rest of the population, takes into account total income (not just old-age pension from the National Insurance), and considers possible economies of scale in the household.

The disadvantages of the official low-income measure are that it requires income statistics for the entire population, which only Statistics Norway has access to (and not, for example, NAV), and that it lacks timeliness, as the figures are published with a two-year delay.

A definition based on the rules for old-age pensions in the National Insurance scheme would therefore have the advantage of being available on an ongoing basis. In the report, we therefore discuss two alternative definitions: “less than or equal to the full minimum benefit” and “lower half of the guaranteed pension range”. We find that the latter would be closest to the old minimum pensioner definition and thus provide the smoothest definitional transition from the old to the new National Insurance scheme.