A word from the CEO
Record surplus for the pension customers’ premium fund
KLP is the pension company for the Norwegian local government and healthcare sector. KLP was founded 75 years ago as a partnership of small municipalities, with the goal of offering employees an occupational pension on equal terms. Today, we are proud to be Norway’s largest provider of public-sector occupational pensions, and we look after the pensions of almost one million Norwegians.
We manage pension assets of more than NOK 1,000 billion, and aim to deliver good returns and sustainable development. This is a great responsibility which we take very seriously, for both current and future pensioners. 2023 was a good year in terms of profits, benefitting our customer-owners.
Good returns and solid buffers have allowed KLP to return more than NOK 21 billion to Norwegian local government and healthcare customers this year.
A major reason why we can now deliver this record transfer is that the equity markets did very well last year. Another reason is that we have built up solid buffers in KLP over time, which now allow us to transfer a substantial share directly back to our owners.
Some key figures for 2023
- NOK 21.4 billion transferred to the customers’ premium fund.
- Return of 6.4 per cent on pension assets in the common portfolio.
- Total assets in excess of NOK 1,000 billion
Money transferred to an owner’s premium fund must be used to pay future pension premiums – what the employer is required to set aside for its employees’ pensions. These transfers contribute to reduced pension payments for the municipalities, and release funds that would otherwise have gone into pensions to be used for other purposes.
The robust buffer building is part of KLP’s long-term investment strategy and is essential for us to be able to withstand the fluctuations in earnings that equity investments entail. However equity investments do generate good profits. Together with higher interest rates and higher returns from property going forward, we expect to be able to pass on greater profits to our customers’ premium fund in the future than in the period just past. Now is the time to reap the benefits of a long-term management strategy.
Owners who challenge us
We find that our owners want us to invest at the local and regional level. In 2023, KLP invested more pension money than ever before in Norwegian communities. Among other things, we invested almost NOK 640 million in Norwegian seedcorn companies, which create new jobs and promote new business in municipalities across Norway.
Our owners also face challenges in meeting the need for competent staff, especially in the healthcare sector. We are committed to helping to protect those who are in work and to reducing sick leave, disability and premature retirement. That is why we offer HSE support, and raise awareness of the issues through campaigns and conferences, contributing insights and figures to our owners. This gives a comprehensive picture of disability figures and retirement patterns over time.
In 2023, we also had an exciting collaboration with the Norwegian Association of Local and Regional Authorities (KS), the Nurses’ Association and the Norwegian Union of Municipal and General Employees to boost recruitment into the health and care professions through campaigns and participation in educational fairs. We also brought different professional groups to the attention of our customers through our own promotional films. We feel that the response has been very good.
To our owners’ employees, we show the value of staying at work. We believe that together we can get more people to choose full-time positions, and stay in work for longer.
New pension rules
There are major changes on the way in the pension rules for employees with public-sector occupational pensions. Especially for those born in 1963 and after. The transition from a final salary scheme to an scheme that takes account of all years of work, neutral and flexible pension withdrawal, and changes in AFP and special age pensions calls for good information. Our task is to guide our members so that they can make good choices about their pension. Through good systems and personal guidance, we want to make useful information about pensions available and understandable, so everyone can see how the new rules will affect them.
A globally engaged owner
At the end of last year, we were managing the impressive sum of NOK 1,017 billion in capital. Our mission extends beyond delivering competitive returns – we are also a driving force for sustainable development. Through our investments, we aim to help the world towards the targets set through the UN Sustainable Development Goals and the Paris Agreement.
We take an active part in the management of the 9,000 and more companies we have invested in. Our voting rights at general meetings enable us to influence the direction taken by these companies. Even more important is our strategic direction: We direct our investments towards renewables. This work is yielding concrete results. In 2023, we carried out a due diligence check on listed companies in the Gulf States. Eleven companies were excluded because of a high risk of human rights violations. The companies had particular issues related to authoritarian regimes that restrict freedom of expression and political rights, including those of critics and human rights activists. The companies excluded operate in the building, construction and property sectors and in telecommunications, where the risk is considered particularly high.
KLP also chose to exclude the oil company Saudi Aramco, because of its close ties with dominant state owners and an active position contrary to KLP’s expectations for climate and energy transition plans.
In response to the war in Gaza, we are also carrying out a special due diligence assessment of Israeli companies to pick up any possible involvement in human rights violations.
We will continue to work towards sustainable development for the days ahead.
Sverre Thornes
Group Chief Executive Officer, KLP