Iceland - Pension System Overview
Country Profile (forthcoming)
The parliament in Iceland passed a bill last December to transform the civil servants pension fund, A-division, from DB fully guaranteed into DC not guaranteed with age based accrual rate instead of flat rate accrual. The bill was based on an agreement, made last summer with stakeholders, among them unions for both government and municipality workers. The main objective of this reform is to harmonise the civil servant pension system towards a unified system with the private sector. B-division of civil servants pension fund, which was closed for new members in 1997, is not part of this reform.
As a part of this transformation the state and the municipalities will pay the pension funds concerned upfront 117 billion ISK and 32 billion ISK respectively, a total amount close to 7% of GDP. This injection of 149 billion ISK will consist of cash, bonds and equity and is meant to finance compensation for current active members when changing the accrual rate to age based. New members pension rights will be calculated on age based accrual rate and are not subject to this compensation. It is as well meant to bring the funding level to 100% and to finance increased liabilities, for active members, due to the raising of the retirement age of civil servants from 65 to 67 years and increased longevity according to mortality tables based on years 2010 – 2014.
Additionally 13 billion ISK will be set aside, in case the main assumptions doesn´t hold, for the compensation amounts of respectively 117 and 32 billion ISK.
Iceland in Figures 2013 : http://issuu.com/hagstofa/docs/icelandinfigures2013_vefur