IPS: Individual Pension Savings in Norway

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An IPS should be an important part of your long-term savings strategy in Norway. Here's everything you need to know to get started.

Pension planning is a critical part of financial management, no matter where you live. In Norway, there's a unique vehicle for long-term savings known as the Individual Pension Savings (IPS), which offers numerous benefits.

Pension savings in Norway concept image.

IPS is designed to provide a seamless saving platform for individuals planning for their retirement, with added tax advantages.

I personally have an IPS into which I pay the maximum amount every year. Yet every day I meet people, especially long-term foreign residents who plan to stay here until retirement, who have never heard of it.

So, this article provides an overview of the IPS. We'll cover what it is, and explain why for many people it's an important part of a long-term strategy for pension savings in Norway.

What is IPS in Norway?

Simply put, IPS is a savings scheme that enables individuals to save for their retirement and gain certain tax advantages in return.

While it's often advertised as a tax saving instrument, it's actually tax deferral. You'll receive a tax benefit now, but you'll pay tax on your pension income when it's eventually withdrawn. Nevertheless, it's a helpful savings instrument.

Elderly people by Norway fjord.

It was modified in 2017 when new tax rules were introduced, thus making it more attractive for individuals who want to save towards their pensions. However, recent changes in 2022 have reduced the amount that can be saved every year.

Tax advantages of IPS

IPS provides an advantageous way to grow your retirement savings. First, you get a deferred tax benefit on the amount you save each year. The deferred tax stands at 22% of the savings amount; you only pay taxes when you withdraw the money, which is a significant advantage for savers.

Personal Finance: Read our guides to credit cards and personal loans in Norway.

In practise, what this means is you'll get a deduction on your taxable income on your tax return, meaning you'll pay less in tax for that year.

Secondly, the money in your IPS account isn't subject to Norway's wealth tax. Furthermore, there's no tax on the returns generated by your IPS investments. These tax advantages can lead to a larger pool of savings in the long run.

How does IPS work?

You are free to determine your savings amount, but the annual cap for saving is NOK 15,000. You may see references to NOK 40,000 online, but this was the amount before it was reduced in 2022.

Regardless of how much you save, you get a tax advantage of 22% of the savings amount. For instance, if you save the maximum amount of NOK 15,000, you will get an effective reduction of NOK 3,300 on your tax bill.

You can begin withdrawing your pension from the age of 62. These withdrawals should be spread over a minimum of 10 years, but must run until you are at least 80 years old. This means if you want to start withdrawing the IPS at the earliest possible age of 62, you'll be making withdrawals for 18 years.

Elderly couple walking in Norway.

The minimum monthly savings amount is NOK 300, and the minimum one-time deposit is NOK 1,000. You have the freedom to choose your saving amount and whether it should be done via monthly savings and/or one-time payments.

Personally, I deposit money into my IPS three or four times a year, making sure I reach the maximum amount by the end of the year. My bank's savings app makes it very easy to quickly see the status of my IPS together with my other pension savings and investments.

An IPS isn't one account with one savings rate. It's a ring-fenced saving instrument that allows you to invest the money in index funds and other savings accounts. Within an IPS scheme, you can invest the IPS money into funds and saving profiles, giving you control over your investment strategy.

A typical choice for long-term savings, both within and outside of the IPS scheme, is a global index fund due to its potential for the best risk-adjusted returns.

Remember, to be eligible for deferred tax for a given income year, you need to ensure your contribution is made well before 31 December of that year.

How do I open an IPS?

Most banks in Norway offer IPS accounts. The best place to start is your own bank, but it's a good idea to compare terms across banks.

Remember an IPS isn't one account with one savings rate. It's a ring-fenced saving instrument that allows you to invest the money in index funds and other savings accounts.

Important IPS considerations

While I think an IPS is an important part of a long-term savings strategy in Norway, it's not for everyone. First things first, if you are struggling with cost of living or paying off debt, it's far more important to focus on that first.

Norway cash kroner banknotes

While IPS provides tax advantages and aids in saving for retirement, it's worth noting that your savings will be locked until you reach retirement age. So, it's advised to only invest the funds that you are confident you won't need access to before the age of 62.

If you're only planning to be in Norway for a year or two, or know for sure you won't retire here, then perhaps it's not the best route for you.

If it is, then it's wise to choose a bank or savings company that offers low fees, as lower fees mean higher returns on your savings.

The IPS, with its deferred tax advantage, can be viewed as a form of interest-free loan. However, this “loan” will have to be repaid in the form of taxes when the funds are withdrawn. It is therefore beneficial to plan how you will manage the deferred tax amount in order to make the most of the IPS.

Independent financial advice is important

IPS represents an important tool for individuals in Norway, offering a streamlined and tax-efficient way to save for retirement. However, this article does not constitute official financial advice.

Personal Finance: Read our guides to credit cards and personal loans in Norway.

As with any long-term financial planning strategy, it's essential to consider your individual financial circumstances and future needs before deciding how much to contribute to an IPS.

By understanding how the IPS works and the associated benefits, you can make a well-informed decision about your retirement savings strategy.

About David Nikel

Originally from the UK, David now lives in Trondheim and was the original founder of Life in Norway back in 2011. He now works as a professional writer on all things Scandinavia.

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3 thoughts on “IPS: Individual Pension Savings in Norway”

  1. Thanks for the content David.
    I am slightly concerned about the annual NOK15k limit for IPS, this sounds super low. Even if that was per month, still sounds quite minimalistic. In the UK the threshold is £60k per annum, that would translate to NOK65k per month.

    • I’m not sure why it’s a concern, exactly, especially compared to a totally different system in the UK? The IPS is a totally optional added extra on top of government, workplace and other private pension savings.


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