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.

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.

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.