The Icelandic pension system is based on three main pillars: the social insurance system, employment pension funds and supplementary pension savings.
This section discusses pension payments under the social insurance system. You can read more about the other two pillars on Hello Norden under the heading The Icelandic Pension System.
Individuals usually start drawing a pension at age 67 years, but the social insurance system now allows greater flexibility. You can apply for old-age pension from the age of 65 under certain conditions, but this will mean a permanent reduction of the pension payment. Under certain conditions you can receive half your old-age pension and at the same time half a pension from your employment pension fund(s). You can also postpone drawing a pension until age 80, in which case payments increase after age 67 according to the actuarial schedule.
Am I entitled to Icelandic old-age pension?
Persons aged 65 years who have lived in Iceland for at least three years between the ages 16-67 have some entitlement to an old-age pension.
Full entitlement requires a total residence of at least 40 years between the ages 16 to 67 years. This residence need not be continuous. If your residence in Iceland is less than 40 years, your entitlement is calculated proportionally based on the residence period.
When can I begin to draw a pension?
Individuals usually start drawing old-age pension at age 67 years. However, an individual may begin to draw a pension from the age of 65 years, in which case the amount of payment will be permanently reduced based on an actuarial schedule. To do so, the pensioner must also receive a pension from the age of 65 from a pension fund or funds and the combined monthly payments must amount to at least the full old-age pension from the Social Insurance Administration.
A person can also apply for a half-pension from the Social Insurance Administration from age 65 on the condition that he/she receives a half-pension from a pension fund or funds. In such case, the combined monthly payments must amount to as least the full old-age pension from the Social Insurance Administration. That portion of the pension which is postponed until age 67 will increase, while the portion received before age 67 will decrease.
If a person decides to postpone drawing old-age pension after reaching the age of 67 the monthly payments will increase based on an actuarial schedule. You can postpone drawing your old-age pension up to 80 years of age. To do so, you must also postpone drawing a pension from your pension fund or funds.
The increase in payments due to postponement of old-age pension and decrease due to taking your pension earlier is always based on actuarial calculations.
How to apply for old-age pension
You must apply to the Social Insurance Administration (Tryggingastofnun) for an Icelandic old-age pension.
The Social Insurance Administration assists persons who have lived in other Nordic countries to apply for their entitlement. Note that different rules apply between countries as to when you can start taking old-age pension.
Persons who live abroad and are applying for an old-age pension must contact the equivalent social security authority in that country.
Can you transfer an Icelandic old-age pension to another Nordic country?
When moving between Nordic countries, the general rule is that old-age pensions are transferred between countries, but supplementary payments based on residence, such as family or petrol allowances, are not transferred. Payments from pension funds are generally transferred, but it is best to contact the pension fund to confirm this.
How is old-age pension paid upon a person’s death?
The entitlement to old-age pension ends at the time of death. According to Icelandic law, upon the death of a person his/her estate becomes an independent legal person, which temporarily acquires all the rights and obligations of the deceased. The rights and obligations of the estate and the person's heirs towards the Social Insurance Administration depend on the probate of the estate.
Can a person work while receiving an old-age pension?
If an individual receives a full old-age pension from the Social Insurance Administration, employment income exceeding a specific amount per month/year will affect the pension payments. If a person meets the requirements for receiving a half-pension from the Social Insurance Administration, any income will not affect pension payments.
Old-age pension supplement
In addition to old-age pension, a person may be entitled to a pension supplement, such as a household allowance for those who live alone or vehicle allowance for persons who are motion-impaired. Supplementary payments are also made for special expenses:
- Drug and medical expenses
- Home-care nursing
- Supported residence communities
- Electricity expenses due to use of oxygen device
- Hearing aids
- Rent not covered by rent subsidy
However, almost all of these payments are subject to certain conditions, for example, pensioners' income, residence in Iceland, home circumstances etc.
Where do you pay tax on Icelandic old-age pension if you live in another Nordic country?
Further information on the taxation of pensions in the Nordic countries can be found on the Nordic tax portal Nordisk eTax.
Who should contact if I have questions?
For more information see the website of Icelandic Social Insurance Administration (Tryggingastofnun ríkisins). You can also get information by telephone at +354 560 4400.
If you have any questions, please fill in our contact form.
NB! If you have questions regarding the processing of a specific case or application, or other personal matters, please contact the relevant authority directly.