The benefits of personal pension savings are substantial and are a major incentive for employees to avail themselves of this possibility to increase pension savings.

Most advantageous savings option today

What makes this savings option so favourable?

  • Tax advantage:
    The tax advantage is clear: supplementary contributions of up to 4% of your wages are not taxed when remitted. Payments from pension funds are taxed, just like other income, but pensioners can use their personal tax deduction to reduce their taxes when the time comes.
  • Employer's contribution:
    The employer/wage payer adds a 2% contribution to the pension savings.
  • No financial income tax:
    No financial income tax is paid on the interest earned on personal pension savings.
  • No effect on interest benefits or child benefits:
    Pension fund assets need not be reported on tax returns and therefore do not reduce interest benefits or child benefits.
  • Protection against debt collectors:
    Pension fund assets are protected against debt collectors, so that they cannot be appropriated even if the person ends up in financial difficulties or becomes bankrupt.

Supplementary contribution from employers

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

Personal pension contribution from wages 2% 4% 

Savings of ISK 500,000 monthly wages  

10,000  20,000

Tax is reduced by    

3,694 7,388 

Actual contribution  

6,306 12,612 

Employer's contribution      

10,000 10,000 

Balance in personal pension fund      

20,000 30,000 

Employees can pay up to 4% of their gross wages into a personal pension fund which are tax-exempt at source and receive a 2% contribution from their employer. Self-employed persons can also make tax-exempt contributions of up to 6% to a personal pension fund, as they pay the employer's contribution themselves as well.

Personal pension savings are a savings opportunity that no one should ignore.

Personal pension savings are voluntary and each person can decide whether to take advantage of this option to increase pension savings.

Persons who decide not to take advantage of the provision, however, will miss out on the contribution from the employer and the state, and in fact will miss out on a negotiated benefit.

Examples of benefits

The figures speak for themselves, as the table below shows.

  • Monthly wages: 500,000 ISK 
  • Employee's contribution: 4%
  • Employer's contribution: 2%
  • Estimated return: 4% real return
Length of savings period 


Monthly payments 
for 7 years*

20 yrs. 103,142,979 kr. 138,309 kr.
30 yrs. 19,414,965 kr. 264,741 kr.
40 yrs. 33,139,69 kr. 451,891 kr.
  • Monthly wages: ISK
  • Employee's contribution: 2%
  • Employer's contribution: 2%
  • Estimated return: 4% real return

Length of savings period 


Monthly payments for 7 years*

20 yrs. 6.761.986 kr. 92.206 kr.
30 yrs. 12.943.310 kr. 176.494 kr.
40 yrs. 22.093.179 kr. 301.261 kr.

*These payments are in addition to payments which the person has earned from a mutual pension fund.