Last week, Alþingi (the Icelandic Parliament) passed new legislation that permanently allows private pension savings to be used for mortgage repayments. Under the new rules, individuals may use their private pension savings to make payments on a mortgage for a total of ten years. The maximum amount is ISK 500,000 per individual per year, and unlike previous rules, there is no separate combined limit for married couples or cohabiting partners. The annual limit will be adjusted each year in line with the Consumer Price Index.
The legislation takes effect on 1 October this year but will apply retroactively from 1 January 2026. This means that all private pension contributions made during the year may be directed toward mortgage repayments, up to ISK 500,000 per individual, even though the payments will not be processed until after 1 October.
The Iceland Revenue and Customs (Skatturinn) administers the use of private pension savings for mortgage repayments. Fund members are therefore encouraged to contact Skatturinn for further information.