I. The Chair of the Board’s and Group CEO's Introduction
At KLP, we manage over 1000 billion NOK in pension funds on behalf of municipal and healthcare sectors in Norway. These are funds that the owners expect to yield good returns while contributing to sustainable development.
We know that many of our customers are experiencing financial pressure, so it is gratifying that this year we can add a record-high 37.7 billion NOK to the customers' premium fund. This is an increase of 70 percent from last year. The recipients can use the money to cover future payments to the pension scheme. Therefore, it will both reduce the customers' pension costs and improve their liquidity.
The reason for the record addition is that we achieved a 9.0 percent return on the customers' funds last year. Since we have built up good solidity in the form of buffers in the company over several years, we can transfer most of last year's surplus to the customers while further strengthening the solidity with 13.9 billion NOK.
KLP is the pension company for the municipal and healthcare sectors in Norway, and there is increasing interest in pensions both in the media, among politicians, and the general public. This is likely due to many changes in the area. Those who turn 62 this year and onwards will retire under new rules in the public sector.
One of the biggest changes is that you earn a pension from all the work you do. The longer you work, the higher your pension will be. And it will also be higher the longer you can postpone starting to withdraw your pension.
At some point, we will all transition to being full-time retirees. But something new is that you can now start withdrawing your pension earlier. This gives flexibility to the individual because it becomes possible to combine work and pension. Hopefully, this makes it easier to stay in work a little longer.
The new rules thus provide more opportunities and more flexibility. It also comes with a responsibility for each of us to think more about the choices we will make. Therefore, KLP has developed systems and a brand-new pension calculator that gives members the opportunity to experiment with different scenarios and see what impact it has on their pension.
We also have a goal that the money we manage should do more than just provide good returns. They should also contribute to sustainable development in the world. One of the milestones we achieved last year was being the first Norwegian financial actor to have our climate goals approved by the British climate foundation Science Based Targets initiative (SBTi). This primarily means that they have confirmed that KLP's goals are in line with the latest version of the climate standard from SBTi and in accordance with the Paris Agreement's commitments.
KLP's revised climate strategy from 2024 involves a significant focus on transition financing, where 30 billion NOK annually is channeled to companies with robust science-based transition plans or that deliver climate solutions. Return requirements must also be met for this part of the portfolio. Since 2018, KLP has annually invested at least six billion NOK in climate and nature solutions. We will continue with this.
As a pension company, it is of course also important for us to continue developing the pension service offerings for our members. New pension rules for everyone who turns 62 this year and later involve extensive communication work. At the same time, systems must be developed to adapt to new rules within, for example, AFP and special age limits.
We turn our gaze back to where we started, on good management and good solidity. The size of the amount we are adding to our customers this year shows that we have built solidity over many years. Especially when the world is as uncertain as it is now, it is good to know that we are well prepared for the days to come.
Tine Sundtoft, Chair of the Board, KLP
Sverre Thornes, Group Chief Executive Officer, KLP