What is a personal pension savings scheme?
In a personal pension savings scheme, you have the option of voluntarily contributing to additional pension savings, which is your personal property. Employees can pay up to 4% of their total salary into a private property fund, and they usually receive a 2% counter-contribution from the employer.
Personal pension savings, or additional savings, is one of the most advantageous forms of savings available, as the premiums are exempt from withholding tax and the returns are exempt from capital gains tax. Personal pension savings can either be used for the purchase of a first property or to increase disposable income after the age of 60.
Specified personal pension
A newer type of personal pension, the so-called specified personal pension, is distinguished from voluntary personal pension savings and will be bound in law on the Icelandic labor market January 1st 2023. Within this new scheme, the employer's contribution to the pension fund will rise to 11,5, so that the total contribution to the pension fund amounts to 15.5% . Thereof the specified personal pension will amount to 3,5%.
Fund members have the choice to place the increased employer contribution (3,5%) in part or in full into their specified personal pension or have the premium go into the mutual fund for increased rights. Fund members must decide for themselves what route to take within this scheme, i.e. choose between having the premium go into the mutual fund or into their personal pension savings fund. Fund members can additionally choose to apply for the regular personal pension savings scheme.