As you approach retirement there are a number of things to keep in mind.
Social Insurance and Pension Funds
In Iceland retirement pensions are made up of social insurance payments, payments from pension funds, supplemental pension savings and other savings.
Payments from pension funds reduce the amount received from the social insurance fund, so it is important that pension applicants consult with the Social Insurance Administration about their rights.
Because pension payments are taxed like income you can use any unused personal tax credit from your spouse. You'll need to submit your tax card with your application to use your personal tax credit.
How to Earn Rights to a Pension
Payments from the social insurance scheme are based on the amount of time you have lived in Iceland. Pension rights begin to accumulate after living in Iceland for three years, with full entitlement for those who have lived in the country for 40 years between the ages of 16 and 67. Those who have lived and worked abroad may have accrued pension rights in those countries.
People who have contributed to pension savings over their lifetime receive payments from their pension funds. You can check any rights you've earned at pension funds through the Pension Gateway.
For more information on pension funds see the Icelandic Pension Funds Association.
When Can You Draw on Your Retirement Pension?
You can start drawing on your retirement pension the first day of the month after your 67th birthday, but you'll need to submit an application to the Social Insurance Administration in a timely manner as well as one pension fund, if relevant. Retirement pension payments are generated automatically for disabled pensioners at their 67th birthday.
The Social Insurance Administration handles payment from the social insurance fund and will issue application forms to prospective pensioners shortly before their 67th birthday.
Drawing on Your Retirement Pension Early or Postponing Payout
You can increase the benefit amount of your social insurance pension payment by 0.5% for each month you postpone drawing on your pension, up until age 72. You can also opt to start drawing on your pension early at age 65, but then your payments will be reduced for each month you draw in advance.
Most pension fund benefits start paying at age 67, but some funds begin paying our at age 65. Pension funds can also allow their member to postpone drawing on their benefits up to age 70. Payments increase or decrease proportionally to these changes.
Retirement Pension Supplements
In addition to their retirement pension payments, pensioners may have the right to supplemental payments, like a child benefit if they support a child under the age of 18 or pay child support costs.
To receive a supplemental household allowance, the pensioner must be single and live alone. Pensioners may also be eligible for a household allowance if their spouse lives in a retirement home or nursing home.
Other pension supplements are paid for in-home nursing care, prescription drugs and other medical expenses, hear aids, rent not covered by a housing subsidy, stays at supported living communities and electricity costs due to the use of oxygen devices. Retirement pension supplements are tax-free and calculated based on individual income.
Allowances in Addition to Pension Payments
People with impaired mobility may apply for an allowance to purchase and operate a vehicle and have their automobile taxes canceled. People who are admitted to a healthcare center or long-term care facility may be eligible to receive a per-diem allowance if they lose their pension payments from the Social Insurance Administration .
Healthcare discount cards can be claimed if an individual has paid their maximum annual amount for healthcare and can support the claim with receipts. Pensioners' dental costs are reimbursed at a rate of 50% to 100%, and they can apply for reimbursed travel costs if their treatment involves long-distance or repeated travel to a healthcare provider or facility.
Allowances are made available for purchasing prescription eyewear and hearing aid devices. The Icelandic Health Insurance in Iceland (SÍ) also subsidizes the cost of assistive medical devices and equipment.
Discounts and Special Terms for Pensioners
Many outlets in the public and private sectors offer discounts on goods and services for pensioners. A number of telecommunication and media companies offer discounts on subscription services and some municipalities discount their property taxes for pensioners.
Members of senior citizen associations are also often offered special terms when they show their association IDs, and many labor unions provide their retired members with various benefits like allowances for continuing education or even vacations.
Supplemental Pension Savings
Supplemental pension savings are a voluntary savings plan in which wage earners can contribute a portion of their income to a special account and receive a guaranteed complementary contribution from their employer.
Payout begins at the age of 60 or later. If the account holder has any supplementary savings remaining in the account when they turn 67, then they may choose to receive the balance as regular payments over time or as a single lump sum.
Supplementary pension savings may often be paid out in their entirety after the age of 60 in cases of disability. Supplementary pension savings are paid out to the account holder's legal heirs upon their death.
For more information on supplementary pension savings see the Icelandic Pension Fund Association.