Norway’s parliament (Storting) has approved legislative changes to the management of guaranteed pension products, paving the way for more flexible investment strategies and potentially higher retirement outcomes for hundreds of thousands of policyholders.

The reforms, which amend Norway’s Foretakspensjonsloven and Insurance Activity Act, introduce new rules designed to improve returns on fripoliser (paid-up pension policies) while maintaining existing guarantees.

Around 600,000 Norwegians hold one or more fripoliser, typically accumulated from previous employment, with nearly one million such contracts in total.

However, restrictive investment rules have historically limited returns, leading to a gradual erosion of purchasing power.

The new legislation allows pension providers to adopt a more long-term investment approach, including the use of so-called ‘borrowed equity’, which enables providers to temporarily support contracts and take on higher-risk, higher-return investments over time.

According to the proposal, borrowed equity can be used where investment returns fall short of guaranteed levels, with any excess returns in later years used to repay the capital.

This is intended to increase providers’ risk-bearing capacity and support higher expected returns for savers.

The rules also clarify that borrowed equity will not transfer between providers when policies are moved, and that receiving providers must supply equivalent capital if needed.

In addition, the legislation introduces changes to how buffer funds are managed, including clearer rules on how remaining buffers are treated upon a policyholder's death.

Under the new framework, such funds will be treated as part of the risk result, with providers permitted to allocate up to 20 per cent to risk equalisation reserves.

Further reforms aim to increase flexibility for policyholders, including allowing investment choice arrangements to continue into the payout phase by default, and simplifying rules around information and advice.

The Ministry of Finance said the changes are intended to support more efficient management of pension capital, safeguard guaranteed benefits, and improve long-term outcomes for savers.

Storebrand chief executive officer, Odd Arild Grefstad, described the reform as “an important and long-awaited change, to the benefit of customers”.

He stressed that the previous framework had forced fripoliser to adopt overly cautious investment strategies, adding that the new rules would allow providers to deliver better pensions over time while maintaining guarantees.

Grefstad also welcomed the clarification that borrowed equity can be used during the payout phase, arguing that this would help ensure the reforms deliver their full effect.

He added that proposals to explore automatic conversion of fripoliser into investment-based arrangements for younger savers could have a significant impact on retirement outcomes, particularly for those with smaller pots and longer time horizons.

The changes will apply to both private and municipal pension arrangements, with further regulatory detail expected to follow as part of the implementation process.

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