As a general rule, members begin to draw a pension at the age 67. You can postpone taking your pension, in which case the amount increases with each month after you reach 67 years of age.  You can postpone drawing your pension up until the age of 80. If you begin to draw your pension at the age of 70, the amount increases by 24.7% and by 222.9% at the age of 80.

The earliest you can begin to draw a pension at is the age of 60. The amount decreases, based on how many months before the age of 67 you receive pension payments. 

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.

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

On the other hand, if you choose to postpone drawing your retirement pension beyond the age of 67, the monthly payments will similarly increase. If you begin to draw your pension at the age of 70, the amount increases by 24.7% and by 229.9% at 80 years of age.

The following table shows the effect on monthly payments depending on whether the retirement pension is accelerated or postponed. The table is prepared by an actuary based on life expectancy in Iceland at any given time and can therefore change.

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

You can begin drawing your pension even while you are still working, in either a full-time or part-time position. You can do this once you reach the age of 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 yearly. 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.

Yes, pension payments are taxed, like any other income from work. Pensioners can therefore utilise their personal deductions to lower taxes.

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. 

Yes, you have to apply for pension. You can do it by logging on to My Pages or by filling out the pdf application form and returning it to the fund.

Applications made before the 20th of each months will receive payment by the end of the same month. 

A pension calculator to estimate your pension income is accessible on My Pages. 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.

Twice a year you will find new statements in My Pages with information on earned entitlement and expected pension payments to members paying contributions to the fund.

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 of the same year. The life certificate can either be sent via mail or email to live@live.is.

The right to a lifelong pension is not inherited.

However, your spouse/partner 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.

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 on your pension.

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

By making payments to the fund members earn the right to lifelong pension benefits, disability pension and spouse's and child's pensions.

As a general principle of tax law the employee’s 4% contribution, the employer’s contribution and a supplementary contribution by the employee of up to 4% in a personal pension fund are exempt from income tax. 

Income tax must be paid, however, on your pension when you draw it.

It is important to keep track of whether contributions deducted from your wages are remitted.

You can log onto My Pages using electronic ID or your Íslykill password to view all payments received by the fund.

It is important to check that the contributions shown on the statement agree with your pay slips.  In the event of substantial failure to remit contributions, valuable pension credits could be lost.

If your pay slips do not match with the statement on My Pages you must contact the employer concerned and/or the fund’s collection division without delay.

Pension credits you have earned are preserved and inflation-indexed. When the time comes to draw your pension, you will be paid accordingly. Many people receive payments from more than one pension fund just as they received wages paid by more than one employer.

The entitlement to a disability pension is based on the Articles of Associoation of the respective pension fund and an agreement on co-operation between pension funds, to which most funds are parties.

No refunds are authorised to US, UK and Canadian nationals or citizens of countries in the European Economic Area (EEA). These countries are:

Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Norway, Portugal, Poland, Romania, Slovakia, Slovenia, Spain, Sweden and the UK, USA, as well as Switzerland.

A fund member who was a national of an EEA state while making contributions is not entitled to a refund of those contributions.

A fund member who is a national of two countries, of which at least one is an EEA state, is not entitled to a refund of pension contributions.

If the length of the contribution period is less than three years, with the result that no right to extrapolation for disability pension has been acquired, the national in question shall receive a refund of both his/her contributions and the employer's contributions with indexation linked to the CPI (Consumer Price Index) but without interest.

If the length of the contribution period is more than three years but less than five years, and the right to extrapolation for a disability pension has been acquired, the refund percentage shall be based on the following table of the Society of Icelandic Actuaries, where the age of the foreign national when the refund is made is the primary determining factor. The refund percentage is therefore based on the insurance coverage the member has enjoyed.

Where the length of the contribution period exceeds five years and substantial entitlement has been earned, the determination of the refund is appropriately done by the pension fund's actuary.

An application for refund must be accompanied by:

• confirmation from the employer of conclusion of employment;
• a copy of the person's passport;
• a copy of or confirmation of travel tickets;
• a copy of the final pay slip;
• an account number in an Icelandic bank.

Income tax is payable on the refund at source.

Information on the obligation of foreign nationals to pay pension contributions in Iceland is provided by:

Government of Iceland

Moving between states - Social Insurance Administration

National Association of Pension Funds

As indicated below, the amount of the spouse's pension varies but is always paid for at least in full for three years and then followed by 50% for another two years. 

• If you have children under the age of 23 years of age: Your spouse will receive a spouse's pension until the youngest child has reached the age of 23.
• If your spouse is disabled and younger than 65 years of age: The spouse's pension is paid as long as the spouse is disabled until he/she reaches the age of 67 years of age.

In addition, older provisions in the Articles of Association are still valid:

• Inflation-indexed spouse’s pension for member’s pension contributions up until and including December 2014 to current price levels. 
• If your spouse was born before 1945, a full spouse's pension is paid for three years and a reduced pension for the rest of their life.

The spouse’s pension is 60% of the fund member's earned entitlement at the age of 67 years. A member who satisfies the following conditions is entitled to have his/her entitlement extrapolated to the age of 65 if he/she has:

• has paid pension contributions for at least 3 of the 4 years prior to deceasing
• has paid pension contributions for at least 6 months of the last year prior to deceasing
• has paid pension contributions of at least ISK 80,000* in each of the three years.

The spouse's pension will therefore be 60% of the earned and extrapolated entitlement.

*80,000 is the basic reference amount and must be inflation-indexed at the beginning of each year using the CPI, with the base index at 230 points, see Art. 16.8 of the fund's Articles of Association.

The requirements for the payment of children’s pensions are that the deceased spouse/parent must have paid contributions to the pension fund for 2 of the last 3 years or for at least 6 months of the last year prior to deceasing.

If you are disabled and receive a disability pension from the fund, you are entitled to a child's pension if you have paid contributions to the fund for 2 of the last 3 years or if you are entitled to an extrapolation. The child’s pension entitlement is always the same proportion as the disability pension.

The child's pension is currently around ISK 25,000 per month for each child and is paid until the child reaches 20 years of age. Children’s pensions are inflation-indexed with reference to the CPI (Consumer Price Index).

A child's pension may be reduced if paid in tandem with a reduced disability pension. It may also be reduced if the member's annual contributions have not amounted to at least ISK 80,000* during the reference period prior to the parent's death.

*80,000 is the basic reference amount and must be inflation-indexed at the beginning of each year using the CPI, with the base index at 230 points, see Art. 16.8 of the fund's Articles of Association.

Following the death of a parent, a child's pension is paid into the child's account; a child's pension due to disability is paid to the person receiving the disability pension.

A spouse is the person who, upon the death of a fund member, is:

• married to the deceased person
• in a registered partnership with the deceased person
• a co-habiting partner of the deceased person.

The financial partnership of the spouse and the deceased may not have been divided prior to the latter's death, i.e. married or cohabiting couples must have had joint finances at the time of death.

If the spouse marries again or becomes a co-habiting partner in the period during which he/she is entitled to a spouse's pension, the entitlement is cancelled.

Children’s pensions are paid for your children if you die or become disabled. Foster- and step-children dependent on you have the same entitlement.

Specified personal pension savings are the fund member's personal property and are inherited as provided for by the Inheritance Act. The balance will be paid to the member's heirs in accordance with the rules of the Inheritance Act

Specified personal pension savings comprise a separate fund owned by the fund member. It cannot therefore confer the right to a lifelong pension or support pension; instead, the fund decreases with each withdrawal until it is eventually exhausted.

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.

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 1,478,386. This reference amount will change each year to reflect changes in the CPI from the base index of 513.

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).

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 1,478,386. This reference amount will change each year to reflect changes in the CPI from the base index of 513,0.

You fill out an application to withdraw personal pension savings.

Payments are made from the personal pension division on the last working day of each month. The application must be received by the fund before the 20th of the month in which the payment is to be made.

When a fund member has reached the age of 60 he/she can withdraw their savings from personal pension savings in a lump sum or spread it over whatever period is desired.

If you must cease work due to permanent disability as the result of an accident or illness, you are entitled to have the balance of your personal pension repaid over at least 7 years.

Any remaining balance in your personal pension savings will be paid to your heirs upon your death, in accordance with the rules of the Inheritance Act on legal inheritance. As a result of the provisions postponing payment of income tax on pension contributions, income tax is calculated on these personal pension savings but not inheritance tax.

The following documents must accompany an application after a member's death:

1. A certificate from a District Commissioner titled Statement of Progress of Probate.
   This states who the legal heirs are.
2. Information on the bank account numbers of the legal heirs.

Children or spouses can waive their shares and, in such case, special statements attesting to this are prepared at the fund's office and must be signed by the parties.

Individuals who pay contributions to a private pension can withdraw and utilise payments made in the period from 1 July 2014 to 30 June 2023 without tax for payment towards the principal of a mortgage on residential housing for their own use.

This authorisation is valid until 31 December 2024.

Further information regarding this is to be found on the  Icelandic Revenue and Customs website (Skatturinn)

Individuals who purchase a residential property for the first time are authorised to use to some extent their personal pension savings towards it without tax liability (tax free). 

This authorisation applies to individuals who have not previously owned a residential property. The applicant has to purchase a property either him/herself or jointly with another individual, although the individual’s share of the property has to be at least 30%.

The application must be received by the Iceland Revenue and Customs office within twelve months from the signing of the purchase agreement. 

Find out more at the website of the Iceland Revenue and Customs (Skatturinn)

No conditions are set as to what the loan can be used for, except in the case of conditional authorisations for a mortgage.

Yes. Loans can be paid off at any time without any prepayment charge. Please include the number of the loan in the explanation/payment reference.

Payments can be deposited in account 0515-26-010200, ID no. 430269-4459.

Yes, in those cases where he/she owns a share together with the borrower in the property to be mortgaged or the entire property. Your spouse/partner must also be co-borrower if he/she is included in the credit assessment with you.

If a person other than a spouse or life partner, i.e. who is married to or in a registered partnership with the borrower, is the borrower's co-owner of the property a mortgage cannot be granted for that property.

If a debtor cannot pay the loan instalments, interest or indexation on the due date, the entire loan falls due without prior notice. The debtor will have to pay penalty interest from the due date, at the rate determined by the Central Bank of Iceland, as provided for in the first paragraph of Art. 6 of Act No. 38/2001, if he/she fails to make a payment on time, in addition to all the costs resulting from the default.

The final outcome could be that your home may have to be sold at a forced auction if you fail to make your payments.

When a loan has equal instalments, the same amount is paid towards the principal throughout the entire term. Monthly payments are higher initially and decrease over time as the interest burden decreases. This results in faster equity buildup. 

When a loan has equal payments, the monthly payment amount remains constant over the loan term (if the loan is inflation-indexed, it increases). Monthly payments are lower initially, but equity accumulation is slower. 

The loan calculator calculates the payment burden of the loan and how payments are distributed over the loan term.

If someone other than the spouse, who is married or in a registered partnership with the borrower, co-owns the property with the borrower, it is not possible to obtain a loan against that property. 

Yes, if they own the property offered as collateral in whole or in part alongside the borrower. The spouse also needs to become a co-borrower if their creditworthiness is assessed along with the borrower.

No, third-party mortgage is not an option.  

A notification is sent to the relevant party at least 30 days before the interest rate change takes effect, in accordance with Article 35 of Act No. 118/2016 on Consumer Mortgages. If you take no action, the interest rate on your loan will be fixed again for another five years at the terms available for such loans at that time. Information about current interest rates can be found on the fund's website.

No, only credit assessments from LV (Pension Fund of Commerce) are accepted. Before a mortgage agreement is made, the creditworthiness and payment capacity of all applicants must be assessed.

For information on creditworthiness and payment capacity assessments, refer to items 6 and 15, paragraph 1 of Article 4, as well as Articles 20, 22, 23, and 24 of Act No. 118/2016 on Consumer Mortgages.

The interest rates on LV member loans are based on the pricing of bonds in the market. Interest rate decisions primarily rely on the so-called interest rate bridge, a methodology that calculates an interest margin over risk-free rates. Risk-free rates are assessed based on the yield on government bonds, while the interest margin is determined for each risk factor associated with member loans. Based on this, a proposal is submitted to the fund's board regarding the interest rates for member loans, and the board makes the final decision on their interest rates.

When interest rates rise, it is inevitable that the interest rates on member loans will increase to remain competitive with the fund's other investment opportunities, such as government bonds or covered bonds. Similarly, when interest rates fall, this is reflected in lower interest rates on member loans, aligning the rates with the overall interest rate trends in the country. LV aims to invest members' funds in the best possible environment, considering the interest rates set by the Central Bank of Iceland and the terms available in the bond market.

Interest rate decisions for member loans are based on a theoretical foundation.

To explain further, it is necessary to detail the assumptions behind the interest rate decisions for the bonds the fund invests in, including member loans as one of these investment options. In brief, bond pricing is calculated using a methodology that takes into account the following factors:

• Risk-free market rates: This considers the yield on government bonds in the securities markets. Risk-free rates are calculated based on an assessment of the yield curve derived from government bonds. This approach allows for the evaluation of risk-free rates for different maturities based on market conditions. The rates corresponding to the term of each loan type are then used as the risk-free rates for the respective member loan.
• Covered bond interest margin: This uses the margin on covered bonds over government bonds of the same maturity. Covered bonds issued by commercial banks are secured by collateral in diversified mortgage portfolios of the banks, sharing some characteristics with member loans. The yield demanded by investors for such bonds forms the basis for pricing member loans. For loans with variable interest rates, the shortest covered margin observed in the market or the best available estimate is used.
• Borrower risk premium: In determining the interest rates for member loans, the fund conducts a risk assessment to determine the borrower risk premium, reflecting the additional risk taken by the fund in lending to individuals compared to holding covered bonds.
• Liquidity premium: This considers whether a bond is liquid like government bonds or if a discount is likely required for sale, as with illiquid bonds. Member loans are classified as illiquid bonds, which is reflected in the interest margin.
• Administrative premium: This accounts for the cost of managing member loans, including the operation of the loan department and the involvement of the fund's specialists in asset management, risk management, or legal services, among others.
• Prepayment premium: This prices the option for the borrower to repay the loan without a prepayment fee. It is generally better for the lender to secure long-term interest rates rather than risk the loan being repaid and then having to reinvest in a less favorable bond. The right to prepayment is thus priced and reflected in the prepayment premium.

These six factors together form the assessment of the interest rates applicable to member loans. These factors change based on the nature of the securities markets at any given time. If the Central Bank of Iceland raises interest rates, the yield on government bonds is expected to increase, thereby raising the interest rates on member loans. Conversely, if the Central Bank of Iceland lowers interest rates, bond market rates generally fall, and this is reflected in lower interest rates on member loans.

The maximum loan amount is 70% of the property valuation or the purchase price if it involves a real estate purchase. The appraisal value is not considered.

If the loan-to-value ratio from other lending institutions exceeds 20% of the available collateral, the maximum mortgage amount is 65% of the property valuation or the purchase price in case of a real estate purchase.

If the current recalculated mortgage debts, including the additional loan from the fund, exceed the maximum loan amount from the fund, the evaluation is based on the fund's best interests, despite collateral ratio rules.

The loan term can range from 5 years to 40 years. The maximum loan term for an additional loan for first-time buyers is 25 years.

There are 12 payment due dates per year.

First-time buyers can apply for an additional loan if it maintains the same lien priority as the first loan, with a maximum loan-to-value ratio of 85%. The additional loan is non-indexed with a fixed interest rate for 3 years, and a 0.75% interest rate premium is added. The maximum term for the additional loan is 25 years.

First-time buyers are eligible for loans from the fund if they have made at least one contribution to the fund or a private pension savings plan.

There are no prepayment fees on the fund’s housing loans, meaning borrowers can repay the loans or make additional payments at any time.

According to regulations from the Central Bank of Iceland, the payment-to-income ratio (the proportion of income spent on housing loan payments) must not exceed 40% for first-time buyers.

The Central Bank has issued rules for the maximum mortgage loan debt in proportion to the borrower's income.

The maximum monthly payment for all real estate loans of the borrower may not exceed 35% of the consumer's monthly disposable income when a real estate loan is granted. However, the maximum may be 40% in the case of a first real estate purchase.

No refunds are authorised to U.S., UK or Canadian nationals.

No refunds are authorised to nationals of countries in the European Economic Area (EEA). EEA countries are: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and Switzerland.

In cases where a foreign citizen is entitled to a reimbursement of contributions, the following rules shall apply:

If the period of contribution payments is less than three years, foreign citizens shall recover both their own and their employer's contributions plus indexation calculated with reference to the Consumer Price Index. Reimbursements do not bear interest.

If the period is more than three but less than five years, thus establishing the right to a current valuation of disability benefits, the proportion of recovery shall be based on the following table of the Association of Icelandic Actuaries, where the age of the foreign citizen at the time of recovery is the determinant factor.

If the period of contribution payments exceeds five years, and the amount of the contribution is substantial, the repayment shall be in accordance with the assessment of the Fund's actuary.

A reimbursement of contributions will cancel all benefits from the Fund. Income tax is deducted from the reimbursement.

Fill out the application form and return it to the fund accompanied by:

1. Confirmation from your last employer regarding termination of employment.
2. Copy of the your passport.
3. Copy of your travelling ticket back to your home country or equivalent confirmation.
4. Copy of your last pay slip.
5. Your bank account number in Iceland.