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What is Personal Pension Saving?

Employees and self-employed persons 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.

Employees and self-employed persons can pay up to 4% of their gross wages into a personal pension fund. 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 persons 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 60 years of age. 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  • Under certain circumstances, personal pension savings withdrawn are exempt from tax withheld at source (First time home buyers, or towards mortgage payments).
  • Generally, income tax is withheld on personal pension savings when withdrawn.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 when payment is to be made.


When can I withdraw?

When a fund member has reached age 60 he/she can withdraw the 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 have to 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 upon your death will be paid to your heirs 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 such 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 nos. 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 which the parties must sign.

Mortgage payments using personal pension savings

Persons who pay contributions to private pension can withdraw and utilise payments made during the period 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 on the website of Skatturinn (Iceland Revenue and Customs)



First purchase of a residential property

Individuals who purchase a residential property for the first time are authorized to disburse, up to a certain extent and without tax liability (tax free), their personal pension savings. 

The authorization applies to those individuals that have not owned a residential property previously. The applicant has to purchase a property either himself or jointly with another individual, though his share of the property has to be at least 30%.

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

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


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 assumptions you provide and is for reference only.

Please keep in mind that we only assume 3,5% return on investment. 

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LIV Lífeyrissjodur Verslunarmanna 1846 1022

About Personal Pension Savings (Supplemental Pension Savings)

On island.is website you can find more information on pension, personal pension savings and working in Iceland. 


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