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ENERGY

Five things that are becoming more expensive in Norway (and why)

Consumers in Norway are feeling the pinch due to rising expenses, with the cost of everyday essentials likely to increase further.

Five things that are becoming more expensive in Norway (and why)
Here are five things becoming more expensive in Norway. Pictured is somebody holding some 500 kroner notes. Photo by Nils S. Aasheim/Norges Bank on Flickr.

Norwegian consumers are experiencing increasing costs of living, with goods and essentials becomings more expensive. Factors in the trend include the price of fuel, economic impact of Covid-19, supply chain issues caused by the pandemic, rising raw material and commodity costs, new government policy and more. 

Electricity bills

For those living in the north of the country, you can breathe a sigh of relief because this hasn’t affected you to the same extent as those in the south. 

Energy price records in southern parts of the country have been continually set since the end of summer, and the trend has continued into the autumn. 

Prices have soared due to a combination of record exports to the continent and a dry summer, which has led to low hydroelectric stocks in reservoirs. 

To make matters worse, prices will be expected to continue rising throughout the winter as more people will be using energy to heat their homes.

Raw energy costs for a house that uses around 20,000 kWh of energy each year could reach 6,500 kroner for the last three months of the year, Nettavisen reported earlier this month based on comments from Tor Reier Lilleholt, head of analysis at Volue Insight AS. The price billpayers will fork out will be even higher when accounting for taxes, grid rent and surcharges. 

Heading into next year, the picture is similarly bleak, with Lilleholt predicting the total energy bill for a house that consumes around 20,000 kWh each year could come in anywhere between 30,000- 40,000 kroner when considering all fees, such as taxes and grid rent.

Petrol and diesel

Norway’s fuel prices have been steadily going up in line with global oil market prices, which have doubled from around 40 dollars a barrel to about 85 dollars a barrel over the past year. 

The average price per litre for petrol in Norway was 18.14 kroner in Norway between July and October, according to GlobalPetrolPrices.com

Much like electricity, this cost will only get greater should a proposed change to diesel and petrol tax, outlined by the previous government in the proposed state budget for 2022, get the green light from the new administration. 

An increase of 41 øre from 1.37 kroner to 1.78 kroner per litre has been proposed for petrol. This will not be offset with a cut to road tax, as has been the case with other petrol tax hikes in the past. 

It’s not just petrol taxes getting pumped. Diesel will also see a tax increase of almost 30 percent. The CO2 tax on diesel will rise from 1.58 kroner per litre to 2.05 kroner.

READ MORE: How Norway’s proposed state budget for 2022 could affect your finances

Home renovations

Home improvements in Norway, especially for work where a professional is required, such as plumbing, can cost a small fortune. 

The price of timber has gone up 65 percent over the past year, according to Statistics Norway’s construction costs index

Several factors have caused prices to rise. These include extensive bark beetle outbreaks in Canada and across Europe, which has led to a worldwide shortage of timber.

The shortage has been exacerbated by increased demand in Norway and knock-on effects of the coronavirus pandemic. 

“The reason for the price increase is first and foremost an imbalance between supply and demand and strong competition in international markets,” Heidi Finstad, administrative director of Treindustrien, which represents the wood and timber industry in Norway, told public broadcaster NRK in September. 

Unlike with petrol and energy, though, good news appears to be on the horizon as prices are expected to stabilise in the future once things return to normal in the global timber market. 

READ MORE: Why the cost of home renovations in Norway is rising

Shopping

Grocery bills will also be on the up in the near future. Suppliers and supermarkets say the rising costs of raw materials used to make and package food going up means that they have been left with little choice but to consider putting prices up. 

Sugar, vegetable oil, rapeseed oil and plastic and aluminium, used to package food, have increased significantly over the past year. 

In addition, issues with the global supply chain and delivery have caused uncertainty in the food and drink sector. 

Orkla, Arga, Kiwi, Rignes are among the suppliers and supermarkets that have said that costs would, unfortunately, be passed to consumers. 

READ ALSO: Why food in Norway could become even more expensive

Mortgage and loan repayments

Interest rates will be going up steadily until 2024. This was inevitable after the historically low-interest rate of zero was introduced due to the Covid-19 pandemic. 

The current key interest rate rose from zero to 0.25 percent at the end of September, which may not seem like much, but works out at approximately 8,000 kroner per year more in repayments for a loan or mortgage worth around four million kroner. 

A number of banks and lenders have raised their rates above the key interest rate already. 

Rates will rise to 1.75 percent by 2024, the central bank, Norges Bank, has confirmed.

There are two silver linings to this increased cost, however. Firstly, it is a sign that the economy is recovering from Covid-19, and secondly, the interest rates could help stabilise rising house prices. This will benefit house-hunters looking to get on the property ladder. 

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EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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