Disability pensions from September 1, 2025

In short

Disability pensions from 1 September 2025 are for those who are assessed with a 0 - 25% ability to be active on the labour market according to New Disability Pension is permanent. It replaces the disability pension, income insurance and special maintenance allowance.

For each

Individuals aged 18-67 who are unable to perform work on the labour market because of their ability to participate in the labour market are assessed 0 - 25% according to integrated expert assessment.

Payments in the new system

Almost all those who receive disability pensions receive higher payments in the new system.

Amounts and free income limits

A full disability pension from 1 September 2025 is:

• per month before tax without home allowance.

• per month before tax with household allowance.

Disability pensions are income-related, which means that other taxable income has a downward impact.

It is important to point out that different factors affect individual payments, for example age, residence, whether you live alone, have children, what income you have and more. It is good to look at the disability pension calculator to put in your circumstances and calculate what possible payments you are entitled to.

The general income limit for disability pensions in the new system is 100.000 ISK per month. It includes all income that affects payments to the Social Insurance Administration, including employment income, pension fund income and capital income. The effect of income is a 45% reduction in income above the income limit.

There is no special income limit for disability pensions.

See amounts and free income limits

Effects of residence

The full residence rate is based on a 40-year residence period in Iceland 16 to 67 years. This is unchanged in the new system. Minimum residence conditions.

Iceland has entered into agreements with a number of countries to ensure that people can move and work abroad without losing their accrued rights.

Supplement due to the changed disability system

In the new disability system, a supplement has been introduced for a specific group of disability pensioners whose benefits are reduced due to residency requirements. It is calculated by estimating what the individual's unchanged allowance would be under the old system. A deduction of 65% of all income, except that from TR, is calculated. If that amount is higher than the individual's allowance in the new system, a comparative payment is made to ensure that the person's allowance does not decrease.

Let's take the example of an individual who lives alone, has a 50% residency entitlement, receives a full age-related supplement, and has an income of ISK 100,000 per month.

ISK 461,194 estimated unreduced allowance in the old system*
- ISK 65,000 deduction due to income
- ISK 246,670 allowance in the new system
= ISK 149,524 supplement due to the changed system.
_{*Unchanged allowance in the old system is estimated by adding together the subsistence standard of the maintenance supplement and the portion of the age-related supplement and income guarantee that was exempt from its reduction. This approach ensures that the amount will never be lower than it actually is, and in some cases, slightly higher.}

Age add-on

Those who are entitled to disability or partial disability pension can receive an age supplement, subject to certain conditions.

A full supplement of an age of 18 to 24 is paid to those who are 18 to 24 years old when either the criteria for a rehabilitation pension were first met or when the disability assessment was first approved. This applies whether the first disability assessment took place before or after 1 September 2025. The amount is reduced by 5% from the age of 25 to 44 and is not paid to those who are over 43 years old at the time of the first disability assessment.

Example: If a person receives an approved rating for the first time at the age of 25, the person receives 95% of the full age supplement and keeps that payment.

Example: If a person receives an approved assessment for the first time at the age of 43, the person concerned receives 5% of the full age supplement and keeps that payment.

The age supplement is income-related and reduces the total amount of pension, home allowance and, if applicable, age supplement by 45% of the pensioner's income above the free-income limit, until it is eliminated.

Home supplement

Home supplement is unchanged in the new system.

The home allowance is income-related and reduces the total amount of pension, home allowance and, if applicable, an age supplement by 45% of the pensioner's income above the free-income limit, until it is eliminated.

Child pensions

The Child Pension will not be changed in the new system. It is paid if the parent or the dependant receives disability pension, partly disability pension or sickness and rehabilitation payments. The Child Pension is non-revenue related.

Pension supplements

Pension supplements remain unchanged in the new system. They are a monthly amount added to a disability pension, as well as medical- and rehabilitation allowance, if benefit entitlement exists.

Partial disability pension

From 1 September 2025, an individual entitled to a disability pension can request to be transferred to a partial disability pension. You can send an inquiry to ororka@tr.is, and we will assess whether it is more beneficial for the individual to remain on a disability pension or switch to a partial disability pension, and a decision will be made based on that assessment.

Disability grant

In the new system, disability grant is no longer part of disability assessment. Therefore, no new individuals will receive an assessment for disability grant after 1 September 2025. However, individuals who had disability benefits until 31 August 2025 were transferred to the new system and received permanent disability assessment. Individuals with a disability grant can apply for a disability pension or a partial disability pension from 1 September 2025.

The amount of disability grant is:

• per month for 18 to 61 years old,

• per month for 62 to 67 years old.

Additional payments with disability grants:

• those who have children under the age of 18 on their own will receive 75% of the amount of the child pension with each child,

• persons with reduced mobility may apply for

Disability grant shall be cancelled if:

• wages exceed, which is ISK 214,602 per month and ISK 2,575,220 per year

• an application for re-evaluation is submitted late,

• you become 67 years old because then you will be entitled to a pension. You must apply for a pension separately.