Lifelong pension

A lifelong pension is paid in arrears, on the last working day of each month. Pensions are not paid retroactively. You must apply for your pension before the 20th of the month in which you wish to begin receiving pension payments.

Beginning to draw your pension

The first pension payment is made to members in the month they reach retirement age. Generally members begin to draw their pensions at age 67. However, early retirement is possible from age 60 and retirement can also be delayed to up to 80 years of age. Once a fund member has decided to begin drawing his/her pension, e.g. at 67 years of age, the first pension payment is made on the last working day of the month the member reaches that age, i.e. the month of his/her birthday.

What effect does accelerating or postponing the drawing of my pension have on the pension amount?

Monthly payments to persons beginning to draw their pension before age 67 decrease by as much as 36.2%, depending upon when they begin, as the payment of pensions is then spread over a longer period.

On the other hand, if you decide to postpone drawing your pension until later than at age 67 your monthly payments will similarly increase, by up to 222.9%.

The accompanying table shows how monthly payments are affected by drawing your pension earlier or later than at 67 years of age. The table has been prepared by an actuary based on the current life expectancy of Icelanders and can therefore change.

Age when pension payments begin	Change to monthly payments
60 years	36,2% decrease
65 years	12,8% decrease
67 years	-
68 years	7,4% increase
69 years	15,6% increase
70 years	24,7% increase
75 years	90,5% increase
80 years	222,9% increase

^{*This table is also included in the fund's Articles of Association; the Articles take precedence over these figures in case of any discrepancy.}

Does income from employment affect my lifelong pension?

You can begin drawing your pension even while you are still working, in either a full-time or part-time position. This you can do once you reach age 60. If you are still working when you begin to draw your pension, you continue to pay contributions to the fund from your employment income just like before and in so doing continue to earn credits in the fund.

Under these circumstances your entitlement is re-calculated when you reach 67 years of age, if you began drawing your pension between 60 and 67 years of age, and then again at 70 years of age. Your pension payments will then change to reflect your increased entitlement but your additional entitlement does not increase with age.

Income from employment does not reduce your lifelong pension benefits.

Where can I get information on my pension entitlement?

A pension calculator to estimate your pension income is accessible on the members' area of the LV website. There you can gain access to the Pension Portal (Lífeyrisgáttin) which provides information on each person's pension entitlements in all the pension funds to which he/she has made contributions at any time. By entering details of your wages, the expected age when you will begin drawing your pension etc. in the calculator you can estimate, based on these assumptions, how much the pension payments will be which you can expect to receive each month for the next few years after you begin drawing your pension.

The pension fund also sends a statement twice each year with information on earned entitlement and expected pension payments to members paying contributions to the fund.

Residence outside of Iceland

Pensioners whose legal address is registered outside of Iceland must send us a life certificate every year before May 15th. If the pension fund does not receive the certificate, pension payments will stop from June 1st the same year. The life certificate can either be sent via mail or email to skrifstofa@live.is.

Can the right to a lifelong pension be inherited?

The right to a lifelong pension is not inherited.

However, your spouse is entitled to a spouse's pension from the fund, based on the contributions paid by the fund member prior to his/her death.

The same applies to the entitlement to a child's pension.

Can a spouse receive part of my entitlement to a lifelong pension?

Yes, married couples and co-habiting couples can conclude an agreement to divide their earned entitlement and future entitlement.  An agreement on dividing pension payments can also be concluded after you begin drawing your pension.

Click here to read more about how entitlement can be divided between couples.

Are payments of pensions taxed?

Payments of pensions are taxed like other employment income.

As of 1 January 2023, personal income tax is assessed as follows:

 

• On the first ISK 409.986 of monthly income:                31,45%
  
• On monthly income between ISK 409.987-1.151.012:     37,95%
  
• On monthly income over ISK 1.151.012:                           46.25%

 

It is the responsibility of each pension recipient to give notice of the income tax rate which should apply. The fund must be informed of any income from parties other than the pension fund, so that payments from the fund can be taxed at the proper rate. The fund need not be informed if payments from other sources plus payments from the pension fund do not exceed ISK 1.151.012 monthly.