It is common to distinguish between two forms that provide different solutions for this: A defined-benefit pension scheme is an agreement to pay a specified benefit amount irrespective of the return on the premiums paid in. The benefit can be adjusted for inflation, wages or the like. Premium payments can be changed as a result of demographic changes such as higher life expectancy, but not as a result of lower returns. A fall in returns must be covered by the company or entity if they have their own pension funds. Pensioners are secure under municipal defined-benefit based pension schemes, while municipal service production must absorb the impact of lower returns. National Local Government Pension Fund - premiums and financial income 1994-2001. In billions of NOK  16 14 12  Net financial income  10  Premium income  8 6 4 2 0 -2  1994  1995  1996  1997  1998  1999  2000  2001  SG Kommunalbanken, 30.august 2002  In recent years, municipalities have noticed this additional burden as owners of the National Local Government Pension Fund. However, high returns restrained the rise in premium income towards the end of the 1990s. The alternative to a defined-benefit pension scheme is a defined-contribution pension scheme. The defined-contribution pension plan is a programme under which members decide how pension savings are invested. Future benefits depend on the return. It can be agreed that the pension payments are to be fixed.
As percentage of GDP, 2001 30 25 20 15 10 5 0 Ge  rm  any  No  rw a  y  F in  lan  d De  nm  ar k  F ra  nc e  Sw  ed e  n  UK  US  Sources : BIS/OECD SG Kommunalbanken, 30.august 2002  The turnover and issue volume in the market increased sharply up to the mid-1990s. However, Norwegian companies use the bond market on a far more limited scale than companies in comparable countries. Solid state finances also help to explain the limited size of the private bond market in Norway. A well functioning government bond market can stimulate the private segment of the debt securities market. In most countries, the state has a sizeable borrowing requirement, with a high level of debt. Even though its borrowing requirement is small, the Norwegian government also places emphasis on a well functioning bond market in its government debt policy. Government debt issues are confined to few and large standardised loans. This contributes to higher turnover in the secondary market and hence greater liquidity. With ample liquidity and low risk, government bond rates can serve as a benchmark for private bonds. Effective interest rates on government bonds and private bonds 5-10 year maturity. Per cent 9 8  9 8  Private bonds  7  7  6  6  5  Government bonds  4 Ja n .