Private pension savings for property purchases or loans

Application for using private pension savings

Property owners can use private pension savings tax-free for property purchases or to pay down a loan.

Both options are available:

Withdraw accumulated contributions from the private pension fund to a bank account.
Have future contributions to private pension savings automatically paid towards a loan.

The property must be purchased for personal use, and applicant must have their registered legal residence in the property. The loan being paid must be secured by a mortgage on the property.

First Home: A similar program is available for first time home buyers, which is subject to different rules.

Private pension savings (supplementary pension savings) are generally intended to build up assets for use upon retirement. Once an employee has activated private pension savings, supplementary contributions are automatically paid into a private pension fund with each salary payment, and the employer additionally provides a matching contribution.

Using Private Pension Savings

It is permitted to use private pension savings to make additional payments towards a loan or to withdraw funds for property purchases, even if retirement is not yet imminent, and without having to pay tax on the amount. There is a maximum limit on how much can be utilized:

For married couples and cohabiting partners, the maximum is ISK 750,000 per year.
For individuals, the maximum is ISK 500,000 per year.

See further details about the conditions of the program below.

Withdrawal of Accumulated Savings

If you have accumulated private pension savings, you can choose to withdraw part (or all) of it to use as a down payment for a property purchase.

Only savings contributed during a period when neither you nor your spouse were registered as property owners can withdrawn. This applies to the period from July 2014 up to the month of purchase.

If you have been a property owner for a long time, it is possible that you may not be eligible to withdraw accumulated private pension savings.

Allocation of Future Savings Towards a Loan

You can also choose to arrange for private pension contributions, which would otherwise go into your private pension fund, to be automatically paid towards your housing loan. The maximum payments are ISK 750,000 per year for married couples and cohabiting partners, and ISK 500,000 per year for individuals.

The application only applies to private pension contributions made after the application is submitted.

Both Options Combined

If suitable, you can utilize a combination of both options. You can apply for the withdrawal of private pension savings contributed from July 2014, provided that neither you nor your spouse were registered as property owners during that period, up to the month of purchase.

Subsequently, you can apply for future savings to be paid automatically towards the loan.

Key Conditions

The applicant

Must have their registered legal residence in the property.
Must be a registered borrower of a mortgage secured by the property.

Married couples and cohabiting partners must each apply individually.

For the application for allocation towards a loan, you need:

The number and details of the mortgage and private pension fund.
A registered purchase agreement (if it concerns a new property).
Sjö stafa fastanúmer eignar (if it concerns a new property).

To complete an application for withdrawal, you need:

The seven-digit property registration number.
A registered purchase agreement (unless it concerns a new construction).
The number and details of the mortgage and private pension fund.

Applications for allocation of private pension savings

The processing time for applications is generally 4-6 weeks but may be longer due to seasonal workload.

Once the application decision is finalized, it can be found under 'Communications' on the Tax Authority's service portal. You will receive a notification about the message via email.

If further information ins needed during the processing of the application, you will receive a message about this on the Tax Authority's service portal and a notification via email.

Regarding contributions from the applicant and the employer:

Married couples and cohabiting partners

The applicant's contribution can be up to 4% of their salary (contribution base) and a maximum of ISK 500,000 per year.
The employer's contribution can be up to 2% and a maximum of ISK 250,000 per year.

Individuals

The applicant's contribution can be up to 4% of their salary (contribution base) and a maximum of ISK 333,000 per year.
The employer's contribution can be up to 2% and a maximum of ISK 167,000 per year.

The employer's contribution cannot exceed the applicant's contribution.

If a tax return review reveals that a higher amount has been allocated from the private pension fund than permitted, the excess payment is taxed as income for the taxpayer. This can occur, for example, if the employer makes an additional matching contribution that exceeds 2% of the total annual income.

Changes

Application for using private pension savings

Service provider

Iceland Revenue and Customs

Related material

Private pension savings for first time home buyers