Mandatory Pension Funds

  • Can I get a refund of paid-in contributions if I leave the fund?

    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.

    When foreign nationals leave Iceland, they may be entitled to a refund of their contributions, providing they are nationals of countries outside the European Economic Area (EEA).




  • How much am I obligated to pay into a pension fund?

    The minimum mandatory contribution to a pension fund is 12% 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.

  • Am I able to choose a specific pension fund?

    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.

  • Is it possible to obtain loans from pension 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 fund member loans a good option for those who need long-term loans, e.g. for buying real property.

  • What do I gain by paying into a pension fund?

    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.

  • Why am I obliged to pay into a pension fund?

     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 8% of your total wages.  However, in most instances, the wage payer’s contribution amounts to a higher proportion of your 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).


  • Can people inherit pension fund rights?

    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.