Here are the main things to keep in mind when it comes to disability pensions and how to apply.
The processing of disability pension applications is a collaborative effort among all Icelandic pension funds, so you only need to apply to one fund. That application will then be forwarded to all funds where you have accrued rights.
This ensures that a fund member who is assessed as disabled receives payments according to their accrued rights across all relevant funds.
If you’re unsure which fund last received your contributions, you can find this information on your most recent payslip.
To apply for disability pension benefits through LSR, your work capacity must have been reduced for at least three months. This applies to both Division A and Division B.
However, the required level of disability differs between the divisions:
It’s therefore very important not to delay the application process. If your work capacity has been reduced in line with the conditions in step 2, you should book a doctor’s appointment as soon as possible to request a medical certificate. Ideally, you should see your general practitioner or someone familiar with your medical history.
It is essential that the doctor completes a detailed medical certificate for the disability pension application, which should include:
It is preferable that the certificate is sent electronically to LSR directly from the doctor or health center.
The medical certificate must confirm that the illness or condition has lasted longer than three months. Note that waiting times for medical appointments can be long, so it’s wise to book in advance. However, the appointment should not take place until three months have passed since your work capacity was reduced.
Fund members are responsible for covering the cost of the medical certificate themselves. LSR does not pay for or reimburse any expenses related to the medical certificate.
The application is comprehensive and may require retrieving documents from various sources going back in time, which can be time-consuming. Therefore, allow yourself plenty of time to complete the application calmly and thoroughly at home.
A good starting point is to review the questions in the application and check whether you have access to the necessary information. These include details such as dates, names of doctors, healthcare facilities, and other data you might need to look up. You can always save the application with the information you’ve entered and return to complete it later.
To help shorten the overall processing time, it's wise to begin filling out the application even before your medical certificate is ready, so you can submit it as soon as the certificate arrives.
Please note that LSR’s service representatives can only provide limited assistance with completing the disability application, as it involves compiling various personal documents that LSR does not have access to. However, we are always happy to answer any questions you may have about the process.
As part of processing your application, it will be assessed whether a loss of income has occurred due to the disability. Reference income will be determined based on your average income during the three calendar years prior to the onset of your disability. If you had foreign income during that period, you must document it—for example, with pay slips or tax returns. Your reference income determines how much you can earn without your disability pension being reduced. Failure to submit documentation for all income during the relevant period may result in your reference income being underestimated, thereby limiting the amount you can earn without affecting your benefits.
If your circumstances change after submitting your application, you can always contact LSR and request that your application be withdrawn from processing.
Applications to TR are separate from those submitted to pension funds, but you can use the same medical certificate for both.
The assessment process for disability differs between TR and the pension funds, meaning that the degree of disability may be evaluated differently by each party. The decision of one does not affect the outcome of the other.
You can receive payments from both TR and pension funds simultaneously—whether for rehabilitation or disability benefits. TR’s payments do not reduce pension fund benefits, provided the total income from pensions, child pensions, TR payments, and/or wages does not exceed your reference income. However, payments from pension funds may reduce TR payments in accordance with TR’s regulations.
Familiarize yourself with your rights at TR and submit an application through their website.
Disability pension payments are generally paid from the time the member experiences a loss of income—that is, when income drops below the reference level. But while your application is being reviewed, you may have access to other forms of support, such as:
You should also check your entitlements with your insurance provider. If all other rights have been exhausted, your municipality’s social services office may offer additional support options.
It is essential that the certificate and other documents are thorough to ensure an accurate assessment.
After the medical consultant has delivered their evaluation, the application is processed by LSR. During this stage, several key factors are determined, including the date from which the pension payments should begin and whether payments should be made retroactively. However, LSR will never pay retroactively for more than four years from the date of application.
It is also assessed whether the applicant is entitled to a child pension from LSR or eligible for extrapolation.
Extrapolation mean that instead of calculating disability pension solely based on already earned entitlements, the calculation also considers what the member would have earned if they had continued to pay contributions based on their average income from the last three calendar years—up until age 65.
The rules for extrapolation differ between the A-division and B-division:
In the B-division, extrapolation is only possible if the disability is primarily work-related.
In the A-division, extrapolated entitlements are available if the member has paid minimum contributions to pension funds in at least 3 of the last 4 calendar years, and in at least 6 of the last 12 months. Contributions to other pension funds also count toward this requirement.
Once your application has been processed, you will receive a formal notification via Island.is specifying:
If you have earned rights with other pension funds, each one will send you a separate decision.
You can find more information on extrapolated entitlements and how disability pensions are calculated in each division here:
If you have savings in a private pension plan or specified private pension plan and are assessed as disabled before reaching the general pension withdrawal age, you may request to withdraw those funds. However, there are certain restrictions on how the payments are made:
If the total balance is below a specific lump-sum payment threshold, the entire amount can be paid out at once.
If the balance exceeds the lump-sum threshold, the payout is spread over 7 years in the case of 100% disability. If your assessed disability is less than 100%, the annual payment is reduced proportionally, and the payout period is extended accordingly.
These may include:
These notifications are sent electronically through Ísland.is, so it’s important to check your messages there regularly. Be sure that your registered email address is correct and that you receive email alerts when new messages arrive in your digital inbox.
To manage your settings:
The requirement for reassessment varies depending on your condition and the degree of disability. There is no fixed rule for how often reassessments are required. It is essential to carefully review the information provided in your disability decision and in any follow-up notifications.
If you still meet the criteria for disability when reassessment is due, be sure to submit an updated medical certificate on time to avoid any interruption in payments. You will receive ample notice when reassessment is required.
If your circumstances change—for example, if your annual income exceeds your assessed reference income (from before the disability), or if your work capacity improves—you are required to notify the fund.
If your work capacity changes, you must submit a new medical certificate.
LSR performs regular income reviews and will notify you if your pension payments are adjusted based on the findings.
If you have received a ruling on disability pension payments and have accrued specified private pension savings with LSR, you may apply to withdraw your balance. To do so, fill out the Application for Withdrawal of Specified Private Pension Savings and check the box for withdrawal due to disability in section 3.
If your balance is below a certain threshold (see more here), you can apply to receive it as a lump sum. If your balance is higher, the payout will be evenly distributed over a seven-year period, assuming a 100% disability rating. If your disability is assessed at a lower percentage, the annual payout is reduced proportionally and the payout period extended accordingly.
The processing time for applications is a minimum of five business days, and payouts are made at the end of each month.