The Pension Fund of Commerce is an occupational fully-funded pension scheme governed jointly by the VR trade union and by employers' associations.
Fund members are employees who are members of the VR trade union.
Employees of other commercial workers' unions are also members, as are those who are not members of another pension fund, but base their terms of employment or hiring contract on a VR wage agreement.
Individuals, as well as owners and other managers of companies working within the occupational purview of the fund, can be members even if they do not belong to employee associations.
The Act on Mandatory Insurance of Pension Rights makes it obligatory for all employees and employers or self-employed people to ensure their pension rights through membership of a pension fund from the age of 16 to 70 years of age. On the basis of this provision, various employees or self-employed people can belong to the fund.
Fund members who are between the age of 16 and 70 pay 4% of their total wages to the fund, i.e. fixed wages, overtime and bonuses.
Employers pay a 8% reciprocal contribution, according to a wage agreeement between the VR trade union and SA-Confederation of Icelandic Employers (Samtök atvinnulífsins).
Self-employed people pay 12% of their total wages, i.e. both the employee's and the employer's contribution.
The contribution base does not include payments which are intended to cover expenses incurred, e.g. vehicle allowances.
Pension contribution is tax free
Exempt from income tax is the employee's 4% contribution and the supplementary contribution of up to 4% to a private pension fund.
Also exempt from income tax is the employer's 8% reciprocal contribution and the private pension fund contribution.
Repayment of contributions to citizens in countries of the European Economic Area (EEA) is not permitted. These countries are:
Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland and United Kingdom.
In cases where a foreign citizen has the right to repayment of contributions, the following rules shall apply:
The foreign citizen recovers 80% of the sum of both his own and his employer's contribution plus interest plus indexation calculated with reference to the consumer prices index.
Repayment of contributions will cancel all benefits from the Fund. The repayment will be taxed in the same manner as pension payments and is deducted from the above sum.
An application for repayment shall be accompanied by:
- Confirmation from the last employer regarding termination of employment.
- Copy of the applicant's passport.
- Copy of a passenger ticket back to the home country or and equivalent confirmation.
- Copy of the last pay slip.
- The applicant's bank account number in Iceland.
Fund members are encouraged to monitor employers' contribution payments. In March and September each year, the fund sends its members a statement of received contribution payments, together with a calculation of earned pension rights.
It is important for fund members to ensure that they are not losing pension rights by checking that the information on the statement coincides with their pay statements.
Please contact your employer and/or the fund's collections department as soon as possible if:
1. You have not received a statement from the fund but contribution deductions have been made from your wages.
2. Your pay statements do not coincide with the fund's statement.