Q&A

Only those buying an apartment for the first time can use additional pension savings to pay off loans (mortgage) or save for a down payment. They can also combine the two options to pay off loans (mortgages) and decrease the payment.

The maximum amount for everyone per year is ISK 500,000.

You may utilise additional pension savings to purchase your first apartment for a continuous period of 10 years.

You can apply for this on the website of the Directorate of Internal Revenue www.skatturinn.is

What are the main advantages of additional pension savings?

• Additional pension savings are private savings. They are an important addition to general mandatory pension savings.
• Such savings are convenient. The wage payer sees the paying the premiums.
• No financial income taxes paid on interest income.
• Withdrawals from it can begin at age 60, and you can take all deposits out in a lumpsum or over a longer period, as you choose.
• You save up to twice as fast as through traditional savings
• This is long-term savings, where interest can become most of the accumulated savings because of the effect of interest on interest.
• This helps people to quit working before 70 and is fully inheritable.
• When a pension fund member dies, the deposits, in addition to indexation and interest, are divided between the legal heirs and paid in accordance with certain rules.
• It is possible to draw on additional pension savings if there is a serious accident or illness that results in a reduction of work energy. The pension savings are then paid in accordance with certain rules.
• If an individual goes bankrupt, creditors can file claims against the additional pension savings.

Income tax is paid when deposits are withdrawn.

In the event serious accidents or long-term illness reduce your work capacity, you may draw on your additional pension savings. However, this is not the case if you become unemployed.

You must apply to make withdrawals from an additional pension savings fund. Withdrawals may start, whether in a lump sum or in separate payments when you reach 60 years of age.

Payments from additional pension savings will not influence the old-age pension and income maintenance from Social Security.

Yes, absolutely, as they contribute to better finances at retirement, and make it easier for people to stop working before the age of 70. Additionally, this can benefit you in the event of serious accidents or illness which impair your capacity to work.

Additional pension savings are the best type of savings available. Wage agreements contain a provision on wage payers contributing 2% of their employees’ wages as a complementary contribution to their additional pension savings, provided that the wage earner’s contribution amounts to at least 2%.

Choose your custodian carefully. Custodians generally offer various investment plans involving different investment policies.

It is important that you acquaint yourself well with the various choices before you decide where to invest your additional pension savings. Furthermore, it is imperative to obtain all the information on costs (initial costs, operating expenses, asset management costs).

If you become dissatisfied with the services and investment results, you can move to another custodian. However, doing so can entail costs, and is therefore even more important to acquaint yourself with matters from the start.

Wage earners and the self-employed are permitted to pay up to 4% of their total wages as contributions to additional pension savings. Most wage agreements contain a provision for wage payers to pay 2% of the wages of their employees as a matching contribution to their additional pension savings, providing the wage earner’s contribution amounts to at least 2%.

You may start withdrawing additional pension savings at the age of 60, and you may then withdraw the entire sum. You may also request to spread withdrawals over a longer period. Upon the death of a fund member, it is permitted to withdraw the entire amount of additional pension savings. Upon disability, the payments are spread over a longer period. However, a lump sum payment is permitted if the amount is low.

Pension funds, commercial banks, savings banks, securities companies and life insurance companies can offer additional pension savings. It is not sufficient to request the wage payer to start making additional pension savings payments. It is necessary to sign an agreement with the pension savings custodian.

If a wage earner starts working for a new employer, it is important to contact the pension savings custodian and sign a new agreement with the new wage payer.

As a fund member, you own your additional pension savings. At your death, the deposits, in addition to indexation and interest, will be divided under specific rules between your legal heirs.

Pension payments are usually not sufficient to ensure unchanged income when you retire. It is therefore desirable for everybody to make additional savings, and additional pension savings are the best form of savings to increasing your pension.

The same tax rules apply to contributions for additional pension savings as to pension fund contributions. The contributions are deductible from your tax base, thus reducing your taxes. However, pension payments are taxed, like any other income from work. Pensioners can therefore utilise their personal deductions to lower taxes.

First-time buyers can use additional pension savings to save for a down payment, make payments on a mortage loan or both make mortgage loan payments and lower the burden of a mortgage loans.

The maximum annual amount for everyone is ISK 500,000.

Additional pension savings may be utilised to buy a first apartment over a continuous 10-year period.

Application is made on the website of The Director of Internal Revenue skatturinn.is

No, the condition for the payment of a disability pension is that the pension member has suffered a reduction in income due to an accident or a long-term illness. In the calculation of the reduction in income, consideration is given to earned income from work, payments by the social security system and pension funds and contractual payments.

No. Pension funds do not pay a pension due to unemployment.

Yes. In general, the amount of the child allowance does not depend on the fund member’s wages. Rather, it is a fixed amount which will change in keeping with the rise in the Consumer Price Index (CPI). If a fund member is receiving a disability pension, it will, in addition to any child allowance, never exceed the loss of income which the fund member has verifiably suffered due to his/her disability.

The amount of a disability pension depends on the rights a fund member has acquired in the fund. Fund members may be entitled to additional rights, based on payments they would have made if they had paid their contributions up to their pensionable age.

Rights to which a fund member is entitled, in addition to his/her acquired rights, are called extrapolated rights. To have such rights, the fund member must have paid into the pension fund for at least four consecutive years. In addition, during this period he must have made payments for at least six of the 12 months prior to his/her loss of working capacity.

The right to extrapolation depends on the loss of working capacity not being due to the abuse of alcohol, medications or narcotics. If this is the case, the amount of the disability pension shall be limited to the accumulated rights.

A disability pension is paid until the fund member has reached pensionable age. At this point, it will change to an old age pension. However, a disability pension will be cancelled if the fund member regains full working capacity or does not suffer any reduction of income due to his/her impaired working capacity.

If you are injured or become seriously ill, and this impairs your working capacity, or causes a loss of income, you may be entitled to a pension.

This decision is decided by a loss of income of at least 50% (40% at some funds) and you have been paying into a pension fund for at least two years.

The first three years consider the fund member’s loss of work capacity, based on the work to which membership in the pension fund is related. After this period, the standard shifts to work capacity for all general jobs even though the member cannot do the job he did before the illness or accident. Therefore, this cancels the right to disability if the fund member can do all general jobs.

A right to a disability pension may require a fund member to engage in rehabilitation. This also pertains to the start of disability and to later reassessment.

No

The social security system will also pay a disability pension. See further the website of the Social Insurance Administration.

The disability pension paid by the social security system may affect the disability pension paid by the pension funds. When calculating whether a fund member has suffered an income reduction due to impaired working capacity, consideration is given to earned income from work, payments by the social security system and pension funds and contractual payments.

DIVISION OF RETIREMENT PENSION ENTITLEMENT

DIVISION OF RETIREMENT PENSION PAYMENTS

HEALTH CERTIFICATE

Earned rights are preserved for the fund or funds you have paid into. When the time comes for pension payments, you must apply for them.

Under the Pension Fund Act, foreign nationals being paid wages in Iceland shall pay into a pension fund under the same regulations as Icelandic nationals. An exception to this is when a foreign national within the European Economic Area (EEA) is employed by a foreign company for a limited time and is in possession of an E 101 Certificate issued by his/her home country. Then, he/she enjoys the same insurance as the social security legislation of his/her home country stipulates.

According to Article 19, Paragraph 4 of Act no. 129/1997, it is permissible to reimburse foreign nationals’ pension fund contributions upon their moving away from Iceland, provided that such reimbursement is not prohibited under international agreements to which Iceland is a party.

Iceland has already concluded international agreements with over thirty countries, referred to hereinafter as contracting states. Contracting states are the United States, Canada, United Kingdom, European Economic Area (EEA) member countries, and Switzerland; i.e., all EFTA and EU member states. After Brexit Iceland and Great Britain have concluded an agreement more information. 

• EFTA states are Iceland, Norway, Liechtenstein, and Switzerland, by virtue of the Vaduz Convention.
• EU member states are Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Greece, the Netherlands, Ireland, Italy, Croatia, Cyprus (the Greek part), Latvia, Lithuania, Luxembourg, Malta, Portugal, Poland, Romania, Slovakia, Slovenia, Spain, Sweden, the Czech Republic, Hungary, and Germany.

A person who is a citizen of a contracting state may not apply for reimbursement of pension contributions upon moving away from Iceland.

Even if a person has multiple citizenship, it is not permissible to reimburse contributions if the person is a citizen of one or more contracting states. In cases of such multiple nationality, all of the countries concerned must be non-contracting states in order for reimbursement to be permissible. 

 Regarding Europe - further information 

Under certain conditions, from the age of 65, you can apply for a 50% old-age pension from Tryggingastofnun (TR). To do so, you must also receive 50% pensions from your pension funds. Your working week percentage must not exceed 50%.  A 50% old-age pension from TR exceeding a certain limit is income-related.

For further information.

No. Mandatory pension funds rights provide life-long pension payments, in addition to disability, spousal and child allowances. On the other hand, private pension savings or Additional pension savings pass to a surviving spouse and children.

 Iceland operates an obligatory coinsurance system, according to which all wage earners and those who are self-employed, from 16 to 70 years of age, must pay into a pension fund a contribution amounting to 4% of their total wages.

Your wage payer will pay a contribution amounting to at least 11,5% of your total wages.  

Fund members are all those who are paying, or have paid, a contribution into the pension fund in question. The function of pension funds is to ensure for their fund members old-age pension for the rest of their lives, in addition to protecting them and their families against the loss of wages due to disability (disability pension and payments to surviving children) and death (pension to the surviving spouse and payments surviving children).

By paying into a pension fund, fund members earn the following rights.

• Old age pension to the end of their lives.
• Disability pension upon the loss of employment due to accidents or illness.
• Pension to the surviving spouse upon the death of their spouse, generally a temporary pension (3 to 5 years), while some pension funds will pay a pension to surviving spouses to the end of their lives.
• Payments for surviving children upon the disability or death of the fund member.

The chief objective of pension funds is to pay old-age pensions to the end of their fund members’ lives. As the payment of old age pensions generally constitutes the biggest portion of the fund members’ income during their retirement years, pension fund rights are very important.

Most pension funds grant loans to their fund members against a mortgage subject to specific conditions being met. The credit terms of loans to fund members are, generally, very competitive, making fund member loans a good option for those who need long-term loans, e.g. for buying real property.

Everybody is obligated to be a member of the pension fund which is referred to in their wage agreement or contract of employment. In case a new wage agreement applies to the occupation in question, or the contractual terms of employment are not based on a specific wage agreement, the individual shall be able to choose his/her pension fund depending on the regulations of such funds.

The minimum mandatory contribution to a pension fund is 15,5% of total wages from age 16 to 70.

Wage agreements cover payments into pension funds. The general rule is that the wage earner pays 4% of his/her total wages, and the matching contribution of the wage payer is 11.5%, total contribution of 15.5%. This applies equally to state and municipal civil servants.

The foregoing describes the general rule, but there are exceptions to it, such as for bank employees and employees in older state and municipal pension systems.

Earned rights are preserved for the fund or funds you have paid into. When the time comes for pension payments, you must apply for them.

According to Article 19, Paragraph 4 of Act no. 129/1997, it is permissible to reimburse foreign nationals’ pension fund contributions upon their moving away from Iceland, provided that such reimbursement is not prohibited under international agreements to which Iceland is a party.

Iceland has already concluded international agreements with over thirty countries, referred to hereinafter as contracting states. Contracting states are the United States, Canada, United Kingdom, European Economic Area (EEA) member countries, and Switzerland; i.e., all EFTA and EU member states. After Brexit Iceland and Great Britain have concluded an agreement more information.

• EFTA states are Iceland, Norway, Liechtenstein, and Switzerland, by virtue of the Vaduz Convention.
• EU member states are Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Greece, the Netherlands, Ireland, Italy, Croatia, Cyprus (the Greek part), Latvia, Lithuania, Luxembourg, Malta, Portugal, Poland, Romania, Slovakia, Slovenia, Spain, Sweden, the Czech Republic, Hungary, and Germany.

A person who is a citizen of a contracting state may not apply for reimbursement of pension contributions upon moving away from Iceland.

Even if a person has multiple citizenship, it is not permissible to reimburse contributions if the person is a citizen of one or more contracting states. In cases of such multiple nationality, all of the countries concerned must be non-contracting states in order for reimbursement to be permissible.

Further information

People living in Iceland who may have pension rights in another country apply through the Social Insurance Administration

The Social Insurance Administration will forward the application to the relevant agency abroad and see to communications with the agency.

This applies to the countries under the EEA Agreement further information.

Iceland has also signed international agreements with other states, and the Social Insurance Administration also sees to communications with comparable related agencies in other countries further information.  

This works the same way in the EEA countries and the states with which Iceland has signed international agreements. Thus, if someone lives in another country and has possible rights in Iceland, he or she contacts the Social Insurance Administration’s related agency in the relevant country.
For example – if someone lives in Sweden, he or she contacts Pensionsmyndigheten to apply, for instance, for a pension in Iceland. Pensionsmyndigheten is a comparable agency, and it sends the application to the Social Insurance Administration, which will then forward it to pension funds in Iceland.

Moving within Europe - Which country will pay my old-age pension?

Moving within Europe information 

Earned rights are preserved for the fund or funds you have paid into. When the time comes for pension payments, you must apply for them.

The right to the so-called extrapolated calculation of a disability pension is cancelled one year after such a move, in addition to a child allowance. In the event a fund member has obtained the right to extrapolated calculation upon moving away from Iceland, it will take six months to reinstate such rights after restarting contributions.

This depends on the laws and regulations in the relevant countries. It is important to acquaint yourself well with the rules of the country where you live, and whether it may be necessary to obtain additional insurance.

You keep earned rights, but you lose the right to extrapolated calculation of a disability pension. It may therefore be advisable to consider additional insurance.

This is possible, but because of tax rules, it generally does not generally pay to make contributions to a pension fund in Iceland while living in another country. In Iceland, you can deduct contributions from taxes, and you then pay income tax on withdrawals from a pension fund. There is therefore a certain risk of double taxation.

Payments from pension funds can affect social security rights. Interaction with the social security system can be very complicated since pension payments and financial income can reduce payments from the social security system.

For further information on rights of the social security system, contact the Social Insurance Administration. 

Earned rights are preserved for the fund or funds you have paid into. When the time comes for pension payments, you must apply for them.

While this varies somewhat between funds, the general rule is that you can begin drawing your pension between the ages of 62 and 70. In some instances, pension payments are allowed even earlier, i.e., at age 60. The pension will then be paid monthly in equal amounts for the rest of your life. While the reference age may vary between the pension funds, most of them use 67 years of age as their reference.

It is possible to bring forward or postpone the payment of a pension, most often as of 62 years of age, while several funds provide no upper limits on the age limit how long the payment of the pension can be postponed. The monthly payment will decrease or increase, depending on whether pension payments begin earlier or later. If a fund member starts pension payments earlier, he/she will receive a lower payment per month during a presumably longer period. However, if he/she postpones payments of a pension, he/she will receive higher monthly payments for a presumably shorter period.

Thus, how long a fund member lives determines whether it is an advantage or a disadvantage to start receiving pension payments earlier or later.

Your rights in pension funds are decided by the contributions you have paid into them during your working life.

The social security system ensures a minimum pension for everybody.

All working individuals are obligated to be members of a pension fund and pay into it a specific percentage of their wages.

Wage payers make a matching contribution for each worker to these pension funds. In case an individual has paid very little or nothing into a pension fund, the social security system accepts the responsibility through higher payments.

Further information on social security is to be found on the website of the Social Insurance Administration.

Yes, it is possible to divide old-age pension rights, but not disability pensions, surviving spouse pensions and child allowances. The division of pension rights applies only to those who are currently or have been in legal or common-law marriage. Such division of pension rights shall involve a mutual division which is commensurate, i.e. each party to a legal or common-law marriage shall grant the other party rights equal to their own. Therefore, both parties need to divide their pension rights.

It is permitted to assign to the other party up to one half of pension rights

No, pension fund payments do not depend on anything except a fund member’s paid contributions into pension funds. 

No. The rights  which you have acquired through payments into pension funds will not decrease even if you receive other income after your retirement, e.g., wages, financial income or rental income.

On the other hand, other income can affect payments from the social security system. All income comes into play, including payments from pension funds. Payments from pension funds may reduce payments from the Social Insurance Administration, further information.

Yes, you must apply for a pension from the pension funds. In the event a fund member has the right to a pension, it is sufficient to apply for a pension to the pension fund into which a contribution was paid last or to the fund in which the fund member has the most rights. The fund will then forward the application to the other funds.

Most pension funds grant loans to their fund members against a mortgage, subject to specific conditions being met. The credit terms of loans to fund members are, generally, very competitive, making them a good option for those needing long-term loans, e.g., for buying real estate.

In general, pension funds publish an overview of premiums on My pages on the website of each fund or island.is (Digital mailbox in Iceland).

If you want a overview by mail, you can send an inquiry to your pension fund.

You should compare the overview to your pay slips. If any payments are missing, you should contact your employer and request an explanation or contact your pension fund and ask the fund to collect the unpaid contributions. Pension rights are based on paid contributions.

You should attend annual general meetings and pay attention to the operations and performance of the fund. These are important rights which require following like other assets. Some pension funds also invite their members to attend seminars on pension matters. Attending such seminars can prove to be very useful to attend such seminars to keep up with pension matters and thus be better prepared to assess whether your rights are adequate.

Membership in a pension fund depends on which wage agreement and/or special act applies. If your wage agreement does not cover the occupation in question, or if your contract of employment is not based on a wage agreement, you will be able to choose your pension fund, depending on the regulations of the individual funds.

The regulations of some pension funds do not allow everybody to be a member. This, for example, is the case for the Pension Fund for State Employees (LSR).

Educational video

Earned rights are preserved for the fund or funds you have paid into. When the time comes for pension payments, you must apply for them.

Yes, by law all wage earners, as well as those who are self-employed, are obligated to ensure their pension rights by being a member of a pension fund. This obligatory membership lasts from age 16 to 70.

Under the Pension Fund Act, foreign nationals being paid wages in Iceland shall pay into a pension fund under the same regulations as Icelandic nationals. An exception to this is when a foreign national within the European Economic Area (EEA) is employed by a foreign company for a limited time and is in possession of an E 101 Certificate issued by his/her home country. Then, he/she enjoys the same insurance as the social security legislation of his/her home country stipulates.

The minimum mandatory contribution to a pension fund is 15,5% of total wages from age 16 to 70.

Wage agreements cover payments into pension funds. The general rule is that the wage earner pays 4% of his/her total wages, and the matching contribution of the wage payer is 11.5%, total contribution of 15.5%. This applies equally to state and municipal civil servants.

The foregoing describes the general rule, but there are exceptions to it, such as for bank employees and employees in older state and municipal pension systems.

Rights are not forfeit even though the statements have been lost. 

If you do not remember the name of the pension fund, you can contact +354 563 6400 or send an inquiry with your Icelandic social security number to lifeyrir@greidslustofa.is 

 By paying into a pension fund, fund members earn the following rights.

• Old age pension to the end of their lives.
• Disability pension upon the loss of employment due to accidents or illness.
• Pension to the surviving spouse upon the death of the fund member, generally a temporary pension (3 to 5 years), while some pension funds will pay a pension to surviving spouses to the end of their lives.
• Payments for surviving children upon the disability or death of the fund member.

The chief objective of pension funds is to pay old-age pensions through the end of their fund members’ lives.

As the payment of old age pensions generally constitutes the biggest portion of the fund members’ income during their retirement years, pension fund rights are very important.

According to Article 19, Paragraph 4 of Act no. 129/1997, it is permissible to reimburse foreign nationals’ pension fund contributions upon their moving away from Iceland, provided that such reimbursement is not prohibited under international agreements to which Iceland is a party.

Iceland has already concluded international agreements with over thirty countries, referred to hereinafter as contracting states. Contracting states are the United States, Canada, United Kingdom, European Economic Area (EEA) member countries, and Switzerland; i.e., all EFTA and EU member states. After Brexit Iceland and Great Britain have concluded an agreement more information. 

• EFTA states are Iceland, Norway, Liechtenstein, and Switzerland, by virtue of the Vaduz Convention.
• EU member states are Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Greece, the Netherlands, Ireland, Italy, Croatia, Cyprus (the Greek part), Latvia, Lithuania, Luxembourg, Malta, Portugal, Poland, Romania, Slovakia, Slovenia, Spain, Sweden, the Czech Republic, Hungary, and Germany.

A person who is a citizen of a contracting state may not apply for reimbursement of pension contributions upon moving away from Iceland.

Even if a person has multiple citizenship, it is not permissible to reimburse contributions if the person is a citizen of one or more contracting states. In cases of such multiple nationality, all of the countries concerned must be non-contracting states in order for reimbursement to be permissible. 

 Regarding Europe - further information 

Pension fund contributions are to be paid monthly. They are due by the 10^th day of the month following the month for which wages have been paid. Note, however, you have till the last day of the month to pay a contribution. After that, penalty interest begins accruing from the due date (the 10^th day month).

Educational video

The Directorate of Internal Revenue monitors the payment of pension contributions by comparing information provided by the pension funds to the paid-in contributions with information provided on the tax returns of wage earners and the self-employed.

Fund members ought to check that the mandatory contributions are being paid on their wages. For the Wage Guarantee Fund to cover the contributions of a wage earner, he/she must verify the wage payer’s submission of them to the pension fund within 60 days from the date of the statement.

If contributions are missing from the statement, it is important that the wage earner notify the Wage Guarantee Fund of this by submitting their pay slips within 60 days.

Where you can find overview

• In general, pension funds publish an overview of premiums on My pages on the website of each fund or island.is (Digital mailbox in Iceland).
• If you want a overview by mail, you can send an inquiry to your pension fund.
• It is good to compare regularly the overview to your pay slips. If any payments are missing, you should contact your wage payer and request an explanation or contact your pension fund and ask the fund to collect the unpaid contributions. 

Pension rights are exclusively based on paid contributions.

No, you can also utilise additional pension savings to pay off a mortgage loan or both pay off a mortgage loan and lowering future payment's burden. 

Yes, the maximum amount per individual is ISK 500,000 per year, for a continuous period of 10 years.

First-time buyers can use additional pension savings to save for a down payment, make payments on a mortage loan or both make mortgage loan payments and lower the burden of a mortgage loans.

The maximum annual amount for everyone is ISK 500,000.

Additional pension savings may be utilised to buy a first apartment over a continuous 10-year period.

Application is made on the website of The Director of Internal Revenue skatturinn.is

Pension rights are not transferable between the funds. Pension funds have special rules on communications amongst themselves.

When it comes to start receiving a pension, it is sufficient to apply to the fund into which a contribution was last paid, and it will break forward the application to other funds into which contributions have been paid.

The right to the so-called extrapolated calculation of a disability pension is cancelled one year after such a move, in addition to a child allowance. In the event a fund member has acquired the right to the extrapolated calculation upon a move from Iceland, it will take six months to reinstate such rights from the start of renewed contributions.

You can view all your rights by visiting the Pension Portal. Pension members can access them on the websites of the pension funds, using Icelandic electronic identity, log in to my pages or the fund member's website. More information. 

When the time comes to receive a pension, it is sufficient to apply to one fund since there is a special agreement on relations between the pension funds. Generally, application is made to the fund into which a contribution was last paid, and then the application will be forwarded to the other funds.

Most pension funds grant to their members loans on all favourable terms against a mortgage in real estate. Credit regulations and terms vary between funds.

Rights vary between pension funds. The Pension Fund Act stipulates the minimum insurance cover of pension funds. Most pension funds operate websites containing information on the rights they are providing. The most detailed information on rights is contained in the articles of association of the pension fund in question.

Yes, pension payments are indexed. Most pension funds alter the amount of the pension according to changes in the Consumer Price Index (CPI). Some pension funds calculate pensions as a proportion of wages, thus being raised consistent with pay raises.

Pension fund rights depend on the contributions paid into the fund.

Under law, pension funds ought to ensure a minimum pension, amounting to 56% of the wages, of which a contribution is paid into a pension fund for a monthly pension for the rest of your life, assuming contributions have been paid for 40 years. The same minimum applies for a disability pension. However, a pension to the surviving spouse shall be 50% of the minimum insurance cover. Child allowances are usually a fixed amount and do not depend on the fund member’s wages. Many pension funds grant more rights than the minimum insurance cover stipulated by law, as either coinsurance or a private fund.

Educational video

Earned rights are preserved for the fund or funds you have paid into. When the time comes for pension payments, you must apply for them.

No. Pension funds do not pay a pension due to unemployment.

In general, it takes new fund members three years to acquire the right to a full disability pension. This means that young people who are starting work in the labour market have no disability insurance during their first years. This is bad, considering that these are the years when people are starting a family and setting up their home. Therefore, it would be sensible for new fund members to buy their own disability insurance.

New fund members with children to support and with significant financial obligations should seriously consider buying additional insurance to protect their family from loss of income if misfortune strike. A life insurance policy can be crucial upon death to protect the family against the loss of income if the fund member dies. At death, a pension for the surviving spouse will be paid by the pension fund until the youngest child has reached the age of 18 (some pension funds make payments for surviving children for a longer period).

The rights during the first three years of contributions to a pension fund are often insubstantial since there is no right to extrapolation. It is therefore important to assess the need for additional insurance, such as life insurance and medical cost insurance

Yes. The disposition of contributions to “specified additional pension savings” do not, regarding those contributions, earn rights to lifelong pension payments, disability and surviving spouse pensions with extrapolation.

• You can begin receiving “specified additional pension savings” five years before the traditional pension age. You can begin receiving other additional pension savings when you turn 60.
• You can use “specified additional pension savings” tax-free to purchase your first appartment if certain conditions are met.
• When a fund member dies, “specified additional pension savings” pass to a surviving spouse and children, like other additional pension savings.
• In both instances, fund members can choose their yield programme.

According to the law, the fund member is allowed to pay 3,5%  into specified additonal pension savings. Further information is provided by pension funds.

Fund members may elect to pay 3,5% additional contribution into “specified additional pension savings” within a minimum premium of 15,5%.

This does not involve “regular” additional pension savings, and fund members must make their own informed decisions on whether they want to take this course. If no choice is made, the contribution will go into a co-insurance department and thereby increase pension rights.

Educational video 

You look at your pension fund's website and log in to my pages or the fund member's website, with Icelandic electronic identity card. Check the overview on how your pension rights are generated and accumulating. 

Most overview also show what pension payments you will receive upon retirement, assuming continuing contributions. If it seems to you that the expected pension payments will not be sufficient, you need to increase your savings to achieve your objective. In addition, it is in your interest to begin saving as soon as possible.

Please note that in general pension funds also publish on overview of premium payments here on this website  island.is (Digital mailbox in Iceland.)

In general, pension funds publish an overview of premiums on My pages on the website of each fund or island.is (Digital mailbox in Iceland).

If you want a overview by mail, you can send an inquiry to your pension fund.

You should compare the overview to your pay slips. If any payments are missing, you should contact your employer and request an explanation or contact your pension fund and ask the fund to collect the unpaid contributions. Pension rights are based on paid contributions.

You should attend annual general meetings and pay attention to the operations and performance of the fund. These are important rights which require following like other assets. Some pension funds also invite their members to attend seminars on pension matters. Attending such seminars can prove to be very useful to attend such seminars to keep up with pension matters and thus be better prepared to assess whether your rights are adequate.

You should immediately familiarise yourself with how rights accrue in your pension fund. How will your pension rights accrue, and what will they be at retirement? What disability payment will you receive if you become disabled due to an accident or illness? What pension will be paid to your close relatives upon your death?

Contact your pension fund and check these points.

All pension funds have a website with information on the rights they provide, more information here. 

Rights are not forfeit even though the statements have been lost. 

If you do not remember the name of the pension fund, you can contact +354 563 6400 or send an inquiry with your Icelandic social security number to lifeyrir@greidslustofa.is 

Earned rights are preserved for the fund or funds you have paid into. When the time comes for pension payments, you must apply for them.

Yes. You need to apply and sign an agreement with a depositary for additional pension savings.

If you change jobs, it is important to contact the depositary for additional pension savings and make a new agreement.

In addition to obligatory premiums, you can choose to pay 2% or 4% of your total wages into additional pension savings. The wage payer makes a matching contribution, usually an additional 2%, that is a direct pay raise.

Everyone should utilise this advantageous savings option, particularly young people. They can use their accumulated additional pension savings to buy their first apartment.

Pension funds receive fund members’ premiums, accumulate interest on them, and pay pensions.

Premiums deposited in a pension fund grant rights to a pension. They also provide insurance against loss due to trauma – for example, disability pensions and pensions for spouses or children.

Yes. In some instances, you can choose a pension fund. This will depend on which agreements and/or special laws apply.

Yes. Everyone aged 16 – 70 must pay part of their wages into a pension fund.

Yes, spouses may share out their pension rights. The division must be mutual and equal. This means that a married couple or cohabitants shall transfer to the other party an equal portion of his/her rights.

The authorization may cover up to one half of the pension rights. However, the division of pension rights between a married couple shall only cover the rights they have accumulated during the period they have been married or cohabiting.

Here are the options for dividing pension rights:

First, people may divide the pension payments already in progress.

Second, they may divide accumulated pension rights can be divided, provided they do so before the fund member turns 65. 

Third, they may divide future rights, i.e., pension rights accumulating after the division has been agreed.

It is important to seek an adviser’s assistance at the pension fund prior to dividing the pensions to ensure that the gain from the division is clear beforehand.

Yes. A pension to the surviving spouse is paid to the surviving spouse upon the death of the fund member. A full pension for the surviving spouse will be paid for at least two years. If the surviving spouse has children under 18 years of age, a full pension for the surviving spouse will be paid until the youngest child has reached 18 years of age (longer for some funds). If the surviving spouse is an invalid at the death of the fund member, and is under 67 years of age, the full pension for the surviving spouse will be paid during the period of the disability.

Some pension funds pay a full pension or a reduced pension for the surviving spouse, even for the rest of his/her life. However, it will be cancelled if the spouse marries someone or becomes a cohabitant. Please note that the surviving spouse is entitled to use the deceased’s tax card for 9 months as of the month of death.

Your spouse may assign to you up to half of his/her pension rights.

When the fund member dies, the surviving spouse’s pension will be paid, whether or not the rights were divided. The full pension for the surviving spouse will be paid for at least two years. If the surviving spouse has children under 18 to support, the full surviving spouse pension will continue until the youngest child turns 18.  Some pension funds continue paying the pension for the surviving spouse.

If the surviving spouse is an invalid when the fund member dies, and is under 67, the pension for the surviving spouse will continue for the duration of the disability.

The pension for the surviving spouse will be cancelled if the spouse remarries or begins cohabiting.

Full pension for the living spouse shall be paid for at least two years. Any extension depends on the conditions in the home and the regulations of the pension fund in question. Some pension funds pay a full or reduced pension to the surviving spouse for the rest of his/her life. However, this will be cancelled in the event the spouse remarries or becomes a cohabitant anew.

If there are children living in the home, the surviving spouse will be paid a full surviving spouse’s pension until the youngest child turns 18 (for a longer period for some funds).

Likewise, a child allowance will be paid if the fund member has been making contributions for at least 24 of the past 36 months, or 6 of the past 12 months, was entitled to an old-age or disability pension at the time of death, or has obtained the right to extrapolation.

Stepchildren or foster children may have a right to a child allowance if the fund member has provably supported.

No. The amount of the pension for the surviving spouse depends on the rights which the fund member has acquired before death, including other rights he/she has accumulated at the fund if he/she has been making contributions up to the age of 65 or 67 (extrapolated calculation).

So as to accumulate the right to extrapolated calculation, the fund member will have to have kept making contributions to the pension fund for at least 24 months in the past 36 months, or 6 months in the past 12 months, before death.

The fund member’s children and adopted children, are entitled to payments for surviving children until they reach 18 years of age (longer at some pension funds). A pension for surviving children is paid if the fund member paid into the fund for at least 24 of the last 36 months, or for six of the last 12 months, prior to the member’s death, has been receiving an old-age or a disability pension at death or obtained the right to extrapolation.

Stepchildren and foster children will be entitled if they have verifiably been supported by the fund member.

In general, the amount of the payments to the surviving children is not dependent on the fund member’s wages, rather being a fixed amount, which will change in keeping with the rise in the Consumer Price Index (CPI).

The amount of the pension for the surviving children will be higher due to the fund member’s death than if he/she loses the capacity to work.

While a pension is taxed as any other work income, pensioners can use their personal allowance to reduce their taxes. As pension contributions are being paid without being taxed into a pension fund, this avoids double taxation of a pension. Rights at pension funds are exempt from capital gains tax on interest income.

A fund member can at most deduct 8% of his/her wages from taxable income, 4% for a contribution into a coinsurance fund and 4% for additional pension savings.

Wage payers’ contributions are deductible before income tax is calculated. Thus, they are not deemed to be wage earners’ benefits.

Income tax is calculated upon payment of the pension, as on other income.

The same tax rules apply to contributions for additional pension savings as to pension fund contributions. The contributions are deductible from your tax base, thus reducing your taxes. However, pension payments are taxed, like any other income from work. Pensioners can therefore utilise their personal deductions to lower taxes.

Pension funds do not pay funeral costs. They pay surviving the spouse’s pension and children’s allowances.

Upon death, additional pension savings go to the surviving spouse and children. The division is that a married spouse gets 2/3 of the additional pension savings and the children 1/3. The additional pension savings are divided even though the spouse stays in an unsettled estate. If the deceased was neither married nor had children, the balance of the additional pension savings are transferred into the deceased’s estate and goes to the heirs.

No. The amount of a surviving spouse’s pension depends on the rights that the spouse acquired before dying, in addition to the rights he/she had acquired from the fund if the fund member had paid contributions through age 65 or 67 (extrapolation).

For the right of extrapolation to come into force, a fund member must have paid contributions into the pension fund for at least 24 of the previous 36 months and for six of the last 12 months before dying.