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What are Personal Pension Savings?

Employees and self-employed individuals can pay up to 4% of their gross wages into personal pension savings. Those who contribute at least 2% and up to 4% of their savings in this manner receive a 2% contribution from their employer. These contributions are tax-exempt at source.

Collective bargaining agreements provide for a 2% employer's contribution to an employee's personal pension fund, which means that people who contribute at least 2% and up to 4% of their savings in this manner receive a 2% contribution from their employer.

Personal pension savings are available for withdrawal once a fund member has reached the age of 60. The fund member then decides how to withdraw his/her savings (in a lump sum or spread over a longer period).

Supplementary/personal pension savings are fully inherited under the inheritance laws upon the death of fund members.

Personal pension savings are an extremely advantageous savings option.

  • The contributions are exempt from income tax withheld at source.
  • Returns are also exempt from financial income tax.
  • Your personal pension savings are protected by law from collection actions.
  • The employer's 2% contribution is the equivalent of a wage raise.
  • Under certain circumstances, personal pension savings withdrawn are exempt from tax withheld at source (First time home buyers, or towards mortgage payments).
  • Generally, income tax is withheld on personal pension savings when withdrawn.

Frequently asked questions

How do I withdraw?

You fill out an application to withdraw personal pension savings.

Payments are made from the personal pension division on the last working day of each month. The application must be received by the fund before the 20th of the month in which the payment is to be made.


When can I withdraw?

When a fund member has reached the age of 60 he/she can withdraw their savings from personal pension savings in a lump sum or spread it over whatever period is desired.

In case of illness or accident

If you must cease work due to permanent disability as the result of an accident or illness, you are entitled to have the balance of your personal pension repaid over at least 7 years.

In case of death

Any remaining balance in your personal pension savings will be paid to your heirs upon your death, in accordance with the rules of the Inheritance Act on legal inheritance. As a result of the provisions postponing payment of income tax on pension contributions, income tax is calculated on these personal pension savings but not inheritance tax.

The following documents must accompany an application after a member's death:

  1. A certificate from a District Commissioner titled Statement of Progress of Probate.
    This states who the legal heirs are.
  2. Information on the bank account numbers of the legal heirs.

Children or spouses can waive their shares and, in such case, special statements attesting to this are prepared at the fund's office and must be signed by the parties.

Mortgage payments using personal pension savings

Individuals who pay contributions to a private pension can withdraw and utilise payments made in the period from 1 July 2014 to 30 June 2023 without tax for payment towards the principal of a mortgage on residential housing for their own use.

This authorisation is valid until 31 December 2024.

Further information regarding this is to be found on the  Icelandic Revenue and Customs website (Skatturinn)



First purchase of a residential property

Individuals who purchase a residential property for the first time are authorised to use to some extent their personal pension savings towards it without tax liability (tax free). 

This authorisation applies to individuals who have not previously owned a residential property. The applicant has to purchase a property either him/herself or jointly with another individual, although the individual’s share of the property has to be at least 30%.

The application must be received by the Iceland Revenue and Customs office within twelve months from the signing of the purchase agreement. 

Find out more at the website of the Iceland Revenue and Customs (Skatturinn)


Calculate Your Savings

Do you want to know what your balance will be in private savings when you retire? The calculation is based on the input you provide and is for reference only. 

Please bear in mind that we assume a 5% return on investment and that savings will continue to 67 years of age even if you can start withdrawing from 60 year old. 

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About Personal Pension Savings (Supplemental Pension Savings)

At the island.is website you will find more information on pensiona, personal pension savings and working in Iceland. 


More at Island.is


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