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. 

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.

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.

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Specified personal pension savings can be withdrawn in the case of disability, like unrestricted personal pension savings.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.

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)