Retirement

Pension from pension funds

Those who work in the Icelandic labor market earn the right to a lifelong pension by paying contributions to a pension fund. The general rule is that you can start drawing a pension between the ages of 62 and 70. The pension is paid out monthly in equal payments until the end of life. The retirement age is not the same for all pension funds, but most aim at 67 years.

You have to apply for a pension from a pension fund and it is sufficient to apply for a pension to the fund to which the last payment was made or to the fund with which the fund member has the most rights. The fund forwards the application to other funds on request.

The application and rights can be approached at the website of the relevant pension fund. Overview of pension funds in Iceland is here.

If any doesn‘t have electronic ID in Iceland  you can send a request for pension rights to lifeyrir@greidslustofa.is

Pension from the Social Insurance Administration

Social Insurance payments are proportional to residence in Iceland. Those who have lived or worked abroad may be entitled to pension payments in the respective country.

Those who are 65 years of age or older and have had legal residence in Iceland for at least three years may have some right to an old-age pension or a pension from the Social Insurance Administration.

You need to apply for a pension at the Social Insurance Administration for payments to start on the first day of the month following your 67th birthday. Before applying for a pension at the Social Insurance Administration, apply for a pension from all pension funds that have been paid into.

Please note that the pension from the Social Insurance Administration is income-related, so all interest income and pensions from pension funds have effect on it.

You can apply for half of the old-age pension from Social Insurance Administration and half from the pension fund.

Rights for working abroad

The Social Insurance Administration can negotiate with other states and Foreign Social Insurance Administrations on reciprocal rights to the benefits provided by the Social Insurance Administration. Social Insurance Administration provides more information on rights due to work abroad and applications for such payments. It is also worth looking at information about pensions from the European Union.

Drawing on Your Retirement Pension Early or Postponing Payout

By postponing the retirement pension, the amount can be increased by 0.5 percent for each month that is postponed, up to the age of 72. It is also possible to accelerate withdrawal until age 65, but then the amount decreases for each month that it is accelerated.

In general, pension funds start paying out at the age of 67, but some funds target the age of 65. Pension funds can allow their fund members to postpone taking a pension until the age of 70, payments will then increase or decrease proportionally.

Residence abroad

When a continuous stay abroad is longer than 6 months, the transfer of legal domicile out of the country must be reported to the Registers Iceland and specify the country to which it is transferred.

When moving from Iceland it is important whether the move is to an EEA country, the United States, Canada Switzerland, or not and whether an agreement in the field of social insurance exists between Iceland and the country in question Information on the Social Insurance Administration website

Individuals who move to EEA countries keep their pension from the Social Insurance Administration, but social payments are canceled. If there is no agreement in the field of social insurance with the country in question, pension payments and other payments from the Social Insurance Administration will be canceled.

Confirmation of life

Those who live abroad and receive a pension from Icelandic pension funds and the Social Insurance Administration must send a life certificate or confirmation of life every year.

Appropriate authorities at each location; the national register, town offices, tax office, or other public institutions publish such a certificate.

The return deadline is once a year, but you need to check the funds' websites to find out when the respective fund's return deadline is.

Tax on pensions when living abroad

A copy of the tax return abroad must be submitted to the Social Insurance Administration and pension funds.

Suppose you live in a country with which Iceland has finalized a double taxation agreement and it is stipulated that pension income should be taxed in the country of residence. In that case, the person must apply annually for an exemption from paying taxes on the Tax's website.

Pension funds and the Social Insurance Administration must withhold payment unless there is an approved exemption.

Nordic countries

According to the Nordic double taxation agreement, pensions must be taxed in the country in which they are paid. All pensions paid from Iceland to persons residing

in the Nordic countries are therefore taxed in Iceland and exemptions are never issued.

Pensions and payments from the Social Insurance Administration

Those who receive a pension from the Social Insurance Administration may travel abroad, but the maximum stay outside Iceland is 6 months in every 12 months.

When moving to other countries, the Social Insurance Administration must be notified of a change of address as well as a change of legal residence to Registers Iceland. Payments may be canceled if a change of address is not reported in time.

The Social Insurance Administration requests annually a tax return from the country of residence and a life certificate.

The Social Insurance Administration is in charge of transferring payments to customers who live abroad.

Home Support

Elderly people or pensioners who live alone can also apply for household support (in Icelandic) from the Social Insurance Administration if certain conditions are met.

Applicant must be single and live alone. It is also permitted to pay household allowance to the pensioner if the spouse stays in a nursing home.

Supplemental Pension Savings

Additional pension savings are voluntary savings that improve the welfare of older people and promote flexibility at retirement.

• You can start withdrawing the additional pension when you reach the age of 60. It can be withdrawn in one go or divided into payments.

• If the account holder has additional savings after the age of 67, there is a choice to have the balance paid out in equal instalments or all at once.

Payments from additional pension savings do not affect pension payments.

You must apply for the payment of a supplementary pension in additional private pension fund from the fund into which it is paid.

Additional savings are paid to legal heirs upon death.

For more information on supplementary pension savings see the Icelandic Pension Fund Association.

Distribution of pension rights

The law on pension funds contains a provision that allows fund members to make a written contract with their spouses on the mutual and equal distribution of earned pension rights.

The law provides for three possibilities in contracts between married couples and cohabitants.

• a) to share earned pension rights,

• b) to divide the future rights (the premium) and

• c) dividing the payments when the pension has started.

Pension funds provide information and advice on the distribution of pension rights.

Other rights

Persons aged 65 or older have various rights regarding entitlement and old-age pension. Social Insurance Administration provide helpful information.

• Pension supplement may be paid, for example, for: costs of care, medication costs, purchase of hearing aids or house rent that is not included in the rent allowance.

• Additional social support for older people

• Caring benefits for spouses of pensioners

• Payment participation in a stay in a nursing home. Here is a cost participation calculator

• Rights on the death of a spouse

(Information in Icelandic)