Norwegians choose to withdraw their pension early to try “smart” the system, Norway's Institute for Social Research research professor, Anne Skevik Grødem, has said.

Speaking at a webinar last week on flexible pensions, hosted by the Finnish Centre for Pensions (ETK), Skevik Grødem highlighted the drivers for people choosing to take their pension early.

The standard age for taking the state pension in Norway is 67, however, Norwegians can choose to take their pension as early as 62. This option was introduced in a 2011 pension reform, which also saw the system transition from a defined benefit to a defined contribution logic.

Skevik Grødem, quoting previous research she has undertaken, said almost three quarters (84 per cent) of 62–66-year-olds who combine work and a pension draw it at a rate of 100 per cent, and the majority choose to keep working full time.
The average working hours for individuals aged 62-66 who combined work and a pension in 2019 was 33, whilst the average working hours for the same group who did not draw a pension in 2019 was 34 hours.

Skevik Grødem, said: “We don’t really know why people do what they do with regard to drawing or not drawing pension. It’s kind of a black box, we can see what they’re doing from the industry data, but we don’t really know why they’re doing what they do.

“The understanding of the life expectancy adjustments are beginning to become clearer to people and more people are hesitant to start drawing pensions early. Early take up is typically not used to downscale working hours, but instead for other reasons.”

The research, qualitative interviews conducted by Skevik Grødem, found that there were four reasons for people drawing their pension early, including it being a smart financial decision, securing money for their family, health-related benefits and the value of money.

Regarding it being seen as a financial decision, the research found that people either wanted to “outsmart the National Insurance”, wanted to save or invest the money themselves and for others the extra cash would be used on daily expenses.

In addition, savers wanted to secure the money for their family, as there is no inheritance right in the National Insurance. This means when a person dies their state pension would not transfer to their family, which is why they choose to withdraw it early and save it so it can be passed down.

“We were surprised at how strong the awareness was for this, they knew there was no right for their inheritance, but they could secure their money by claiming it early. This seems to be a big driver for early take up while working,” Skevik Grødem said.

Furthermore, some savers used flexible withdrawals as a substitute for health-related benefits as some savers surveyed said they were exhausted and wanted to reduce their time working.

The final reason was that savers believed that the saved money is worth more now than later. The survey found that many people said they wanted to claim money for travel, invest in new projects or downscale work as they see themselves as more active now than they would be at 80.

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