Residence-based insurance

The Icelandic social insurance system is based on the main principle of residence-based insurance, which means that membership of the social insurance system and entitlement to allowances are primarily based on legal domicile and actual residence in Iceland. Residence is defined as legal domicile within the meaning of the Act on Legal Domicile and Place of Residence, unless special circumstances dictate otherwise. An individual is considered insured if they are resident in Iceland, provided other conditions of the laws are met, unless international agreements explicitly state otherwise.

Conditions for pension allowances

Although membership of the insurance system is established through legal residence in Iceland, the right to individual pension allowances is subject to further conditions regarding age, minimum residence period and accrual. It is appropriate to outline here the conditions for the three main allowance categories from the Social Insurance Administration.

The conditions for allowances vary depending on the allowance category. Entitlement to an old-age pension is established when an individual has reached the age of 67 and meets the condition of having been resident for at least three years between the ages of 16 and 67. To receive a full old-age pension, an individual must have been resident in Iceland for at least 40 years during this age period.

The conditions for a disability pension are also based on an age range, which is 18 to 67 years, an integrated expert assessment and a minimum residence period of the last three years before the result of the integrated expert assessment was available. Certain exceptions also apply to the minimum residence period.

The calculation of a disability pension, like the calculation of an old-age pension, is based on the residence ratio based on a 40-year benchmark, with a projection to the age of 67.

The conditions for medical and rehabilitation allowance are based on the individual being between 18 and 67 years of age. The applicant must be resident in Iceland and have been insured for at least the last 12 months before the allowances begin, unless otherwise stipulated by reciprocal international agreements. Furthermore, the individual must not be entitled to, or have an unused right to, wages during absence due to illness, as well as a right to allowances from trade union sickness funds.

It should be noted that special rules apply to the entry of refugees into the social insurance system, which provide significant exemptions from the general residence and waiting period requirements. Individuals who have been granted a residence permit in Iceland on the grounds of international protection are considered insured under Icelandic social insurance from their date of arrival.

The Icelandic social insurance system operates in close interaction with international rules. According to the Social Insurance Act, the government is authorised to enter into reciprocal international agreements where residence, employment or insurance periods in another contracting state are considered equivalent to a residence period in Iceland.

Monitoring

In recent years, the Social Insurance Administration has placed increased emphasis on external monitoring and has systematically strengthened cooperation with other public authorities in order to reduce the risk of misuse of the social insurance system. This involves, on the one hand, participation in multi-party consultation forums, such as the cooperation of public bodies against organised crime, and on the other hand, bilateral cooperation with individual public authorities, including the police and Icelandic Health Insurance.

The Social Insurance Administration regularly verifies the legitimacy of allowances from the social insurance system. The Administration has extensive powers to obtain information from other public authorities, individuals receiving allowances and third parties if there is a reasonable suspicion that an individual is receiving allowances on the basis of incorrect or misleading information.

If there is a suspicion that an individual is receiving allowances on illegitimate grounds, the case is thoroughly investigated.

As appropriate, information is obtained from other public authorities and parties who can shed light on the matter. The person under investigation is also obliged to participate in it and provide the necessary information.

If it is revealed that an allowance has been paid on incorrect grounds, it will be stopped and the overpaid amounts will be reclaimed. Serious cases are reported to the police.

The Social Insurance Administration also closely monitors the development of these issues in neighbouring countries, including through participation in Nordic and European cooperation.