Those who work on the Icelandic labour market accrue pension rights through pension savings. Personal savings can ensure financial security in old age, on top of mandatory contributions to pension funds and the pension from national social insurance.
Pension fund payments must be applied for. Application forms can be obtained from the various pension funds. They are also available from the websites of the pension funds, or they can be received through the post.
It is sufficient to apply for a pension from one fund, although contributions have been made into more than one because most pension funds are members of an agreement that provides for the transfer of premiums between different funds.
All pension funds can supply information concerning the funds into which any individual has contributed during his or her lifetime.
Generally speaking, the pension funds start paying out pensions at the age of 67, however, several funds have set this age at 65. It is prudent to check the rules for the relevant funds.
Pension funds can allow the fund members to postpone the receiving of their pensions until the age of 70, or they can advance it by up to five years. Pension payments will then increase or decrease accordingly.
Pensions are paid out every month in equal payments until the end of life.
With very few exceptions, the amount of a pension is in proportion to the premiums paid during a person's working life.
Pension payments are taxed as wage income. In order to benefit from your personal tax allowance when you start claiming a pension, you will have to return your tax card at the same time as you apply for your pension.
A pension is paid to the surviving spouse of a pension-fund member, if the conditions set by the relevant pension fund are met. Each pension fund sets its own rules regarding the transfer of pensions to a surviving spouse, which concern such issues as the pension amount.
Supplementary pension savings
Supplementary pension saving is a unilateral saving scheme, whereby wage earners can save a portion of their wages by depositing them into a special account, and then receiving a reciprocal employer's contribution.
The payment of a supplementary pension can start at the age of 60 or later, and it is paid out in equal instalments until the age of 67, or later if you so choose.
In general, the final payment of a supplementary pension is 67 years of age, at the earliest. The right to receive payment can be obtained earlier, if the payment is lower than a certain threshold amount.
If the account holder has a supplementary pension savings deposit after the age of 67 years, he or she may decide to have the remainder paid out in equal instalments or in a lump sum.
Supplementary savings may be withdrawn after the age of 60 because of disability, and will be paid to the heirs upon death.
Income tax is levied on paid-out, supplementary pension savings.