Specified personal pension

The employer's pension contribution will increase in stages. Fund members can choose whether the increased contribution will be placed in part or in full in a specified personal savings account or accrue to the mutual insurance division.
If no notice of such choice is sent the entire increase will go to the mutual insurance division.

Mutual insurance division   Specified personal pension
  • Lifelong pensions
  •  Personal property of the fund member
  • Gives a right to disability pension
  •  Withdrawals can begin at age 62 years.
  •  Gives a right to child's and spouse's pensions
  •  Not a lifelong pension
  • The normal age to begin drawing a pension is 67 years.
  •  Does not give a right to disability, spouse's or child's pensions.
  • Drawing of pensions can begin earlier or later.
  •  Can be withdrawn in case of disability like personal pension savings.
 
  •  Cannot be used for payment towards mortgages.

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.

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 They can, however, be withdrawn up to five years earlier, in which case the payments must be distributed over the period which remains until the fund member reaches 67 years of age.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.

Mutual insurance division

You can choose to place all or part of the additional contribution into a mutual insurance division, as previous contributions have been placed. If no such choice is made the entire increase will automatically go to the mutual insurance division. By contributing to the mutual insurance division you earn important entitlements and insurance coverage.

You won't collect up a specific balance on an account, as is the case with personal pension savings, but instead you get a guarantee for lifelong pension payments from the time you begin to draw your pension.

Lifelong pension payments, based on your earned entitlement, will be paid until the end of your life. Other wages or payments do not reduce your lifelong pension.

In addition to a lifelong retirement pension you earn the right to disability pension if your capacity for work is reduced. You also earn the right for your spouse to receive a spouse's pension upon your death and for your children to receive children's pensions should your capacity for work be reduced or upon your death.

Normally retirement begins at 67 years of age. However, you have the option of taking early retirement from age 65 or postponing your retirement to up to age 70.

Disposition of specified personal pension savings

On the fund members' area (Sjóðfélagavefur) of LV's website you can choose where to direct the additional contribution. To access the website you need electronic ID. If you do not have electronic ID you can print out the notification of informed consent, fill it out and deliver it to VR.

If you wish to have more than the 2% contribution placed in specified personal pension savings, after 1 July 2018 the current 2% will increase to up to 3.5%.

  • To direct electronically where the increase in the employer's contribution will go, click here .
  • Click here to obtain the form to direct where the employer's contribution will go in writing.

Directing the contribution to another custodian

A member wishing to transfer that portion of the contribution which is specified personal pension savings to another custodian must send a notification to the fund with a request for the allocation of the increase in the employer's contribution which forms specified personal pension savings.

  • This notification must be accompanied by a copy of an agreement reached with the custodian to receive the contribution portion of the specified personal pension savings or other agreement considered valid by the pension fund.

Click here to direct specified personal pension savings to another custodian.