Pension and insurance

Pension payments

Foreign nationals and their obligation to pay a mandatory contribution to Icelandic pension funds

Wage earners from the European Economic Area

Nationals of the member states of the European Economic Area (EEA) who work in Iceland for an Icelandic employer are, as are Icelandic nationals, obligated to pay a minimum 12% mandatory contribution to a pension fund. An exception from this is when a foreign national from the EEA works temporarily in Iceland for a foreign company. Then he/she is exempt from contributing to a pension fund according to Icelandic laws, provided that the person in question has an E-101 certificate from their home country.

Wage earners outside the European Economic Area

Nationals of countries outside the EEA who work in Iceland are always obligated to pay a minimum 12% contribution of the pension contribution base into a pension fund with an operating license from the Minister of Finance.

Can I pay a mandatory contribution to Íslenski lífeyrissjóðurinn pension fund?

Landsbankinn is the custodian of Íslenski lífeyrissjóðurinn. All wage earners and those who are engaged in business operations or are self-employed can pay a mandatory contribution to Íslenski lífeyrissjóðurinn pension fund. This applies unless a collective bargaining agreement that determines the minimum wage of the relevant profession or employment contract provides for compulsory membership to a particular pension fund. If you are in doubt please contact your employer.

Foreign nationals and payment of supplementary pension savings

Foreign nationals earning wages in Iceland are free to pay a supplementary pension contribution to Landsbankinn or Íslenski lífeyrissjóðurinn pension fund. As previously mentioned, Landsbankinn is custodian of the fund.

Moving from Iceland - Reimbursement

Mandatory pension contribution

Wage earners from the European Economic Area

According to the EEA Agreement, pension funds are not authorised to reimburse contributions to nationals of the member states of the EEA Agreement when moving from Iceland. This is based on a mutual agreement between the member states of the EEA on how to apply social security rules to wage earners, self-employed individuals and their next of kin who move between member states since Annex VI to the EEA Agreement stipulates that mandatory insurance of pension rights falls under the social security system.

Foreign nationals who move from Iceland are bound by rules, which apply to the insurance coverage, the same way as Icelandic nationals are. When disbursement can begin according to the terms of the insurance coverage, the foreign national shall turn to his/her national social security institution which acts as an intermediate body for the disbursement of pension rights from Iceland. The relevant institution sends the application to the Social Insurance Administration in Iceland.

Foreign nationals outside the European Economic Area

Foreign nationals outside the EEA can apply for reimbursement of pension contributions that have been paid as mandatory pension savings to Íslenski lífeyrissjóðurinn pension fund when moving from Iceland. The reimbursement shall include indexation but exclude interest. However, this only applies if such reimbursement is not prohibited according to an agreement between Iceland and the home country.

Supplementary pension savings

Foreign nationals outside the EEA can also apply to be reimbursed their balance of supplementary pension savings when moving from Iceland. The reimbursement covers the contribution paid in addition to accrued interest. However, this only applies if such reimbursement is not prohibited according to an agreement between Iceland and the home country.