Specified personal pension savings - withdrawal

Specified personal pension savings are the fund member's personal property and are inherited as provided for by the Inheritance Act. These savings are free for withdrawal from age 67. They can, however, be withdrawn up to five years earlier.

The accord between ASÍ and SA of 21 January 2016 provides for an increase in the employer's contribution in stages from 8% to 11.5%.
The total increase in the employer's contribution is 3.5% of wages, which will make the total contribution 15.5%.

  • In the first stage, which began in July 2016, the employer's contribution rose by 0.5%, from 8% to 8.5%.
  • In the second stage, which began in July 2017, the employer's contribution rose by 1.5%, to 10%.
  • In the third stage, which will begin in July 2018, the employer's contribution will rise by 1.5%, to 11.5%.
  • The employee's contribution will be unchanged at 4% of wages.


The above-mentioned accord between ASÍ and SA also provides for each individual fund member to be able to decide whether the increased contributions will be placed entirely or in part in a mutual insurance division, as has been previously the case, or in a personal pension fund. If the fund member chooses to place the increase in a personal pension it will be placed in a new type of personal pension savings, referred to as "specified personal pension savings", to distinguish it from the unrestricted personal pension savings which have been available.

If no notice of such choice is sent the entire increase will go to the mutual insurance division.

Specified personal pension savings

  • Specified personal pension savings are the fund member's personal property and are inherited as provided for by the Inheritance Act.
  • The rules which apply to specified personal pension savings differ in some respect from those of unrestricted personal pension savings. Specified personal savings are free for withdrawal from age 67. They can, however, be withdrawn up to five years earlier, in which case the payments must be distributed over the period which remains until the fund member reaches 67 years of age.
  • Specified personal pension savings comprise a separate fund owned by the fund member. It cannot therefore confer the right to a lifelong pension; instead, the fund decreases with each withdrawal until it is eventually exhausted.
  • Specified personal pension savings cannot be utilised for making payments on loans or other disposition of personal pension savings authorised by special government measures.
  • Specified personal pension savings can be withdrawn in the case of disability, like unrestricted personal pension savings. However, specified personal pension savings do not give entitlement to disability, spouse's or child's pensions.

Rules on withdrawal of specified personal pension savings

Withdrawal age: A fund member may begin withdrawing specified personal pension savings at 62 years of age, in which case the payments must be distributed at least over the period which remains until the fund member reaches 67 years of age.

Derogations can be made from this withdrawal period if the balance on the account is less than ISK 500,000. This reference amount will change each year to reflect changes in the CPI from the base index of 173.5.

Withdrawal in the case of disability: If a rightholder becomes disabled and the fund's medical officer assesses the loss of work capacity suffered as 100%, the member is entitled to withdraw his/her specified personal pension savings in equal annual instalments over a period of seven years. If the percentage of disability is below 100% the annual payments will decrease in proportion to the decrease in disability and the withdrawal period is correspondingly lengthened. At the fund member's request, derogations can be made from this withdrawal period if the balance on the account is less than ISK 500,000. This reference amount will change each year to reflect changes in the CPI from the base index of 173.5.

 Withdrawal following death of member: Upon the death of a member with a positive balance in his/her specified personal pension savings, this balance will be paid to the member's heirs in accordance with the rules of the Inheritance Act. If the fund member is not survived by a spouse or child, the balance will accrue to the member's estate (see the Act on Pension Funds etc., No. 129/1997, as subsequently amended).