Indexation of the National Insurance Scheme’s Basic Amount and Pensions

Indexed in accordance with wage growth

Old-age pension rights in the course of acquisition in the National Insurance Scheme are calculated based on the basic amount, which is adjusted in accordance with the wage growth. This means that when wages increase, the pensions that are being earned increase accordingly. The adjustment is based on the expected wage growth for the year. Any discrepancies between expected and actual wage growth from previous years are also taken into account.

Benefits from the National Insurance Scheme where the size of the basic amount is included in the calculation, also follow the changes in the basic amount. When the basic amount increases, the benefits therefore increase accordingly. Examples of benefits where this occurs are work assessment allowance, disability benefit, allowance adjustment and children’s pension.

Many pension and social security schemes outside the National Insurance Scheme use the basic amount when calculating and/or indexing their benefits.

Different rules for pensions in payment

Different rules apply to old-age pension in payment. Pensions in payment are indexed with the average of wage and price growth. This also applies to the rates for the minimum pension level and the guaranteed pension.

Consultation meetings with organizations

The data basis for calculating wage growth is discussed with organizations representing pensioners, people with disabilities, and employees. After the consultation meetings, the King determines the new basic amount, new adjustment factors, and rates for the minimum pension level and guaranteed pension. The estimated effect of the adjustment of the basic amount and pensions is budgeted under relevant items in the Ministry of Labour and Social Inclusion’s budget.

The Minister of Labour and Social Inclusion is responsible for conducting the consultation meetings on the adjustment of the National Insurance Scheme’s basic amount and pensions.

Timeline for determining the basic amount:

• Mid-May: Consultation meetings with organizations representing pensioners, people with disabilities, and employees.
• End of May: The new basic amount, new adjustment factors, and rates for the minimum pension level and guaranteed pension are determined by royal decree.

The basic amount is adjusted annually

The basic amount in the National Insurance Scheme (G) is adjusted annually with effect from 1 May. Increases and back payments are normally made in June.