Everyone should save into a private pension
Private pension is a direct salary increase for you, because when you start saving into a private pension, you will receive a 2% matching contribution from your employer that you would not receive otherwise. That's why everyone should take advantage of this great bonus.
All employees have the right to save in private pension savings. You choose to pay a premium between 2-4% of your salary and receive a 2% matching contribution from your employer. The savings are free to pay out as you like from the age of 60.
Don't put off starting your savings – the sooner you start making payments, the bigger the return will be in the end. But it's also never too late to start saving in private pension savings, because the employer's matching contribution means that private pension savings are a good option right up until your last day of work.
The advantages of a private pension
- A 2% salary increase for you due to the employer's matching contribution
- A tax advantage is created as the premium is not taxed upon deposit
- Capital income tax is not deducted from returns
- Private pension can be used tax-free for the purchase of a first property
- Private pension is your personal property and is inheritable
- Private pension does not curtail either child benefits or interest benefits
- Withdrawals can begin at the age of 60 and are flexible
- Payments from the private pension do not reduce TR's pension payments
Can I take advantage of LSR's Private Pension?
To be able to save into LSR’s Private Pension, you must meet one or both of the following conditions:
- Have paid a premium to any of LSR's funds at any time
- Be a current member of KÍ, the Icelandic Nurses Association, or one of the member associations of BSRB or BHM
The rules are thus quite broad and if you are not sure whether you can save into LSR’s Private Pension, we encourage you to contact us at the email address sereign@lsr.is, or simply apply for membership to private pension. It only takes a few minutes and we will then contact you to complete the registration.
Choose the investment option that suits your needs
| Plan I | Plan II | Plan III | |
| Volatility in returns (risk) | Major | Moderate | Low |
| Main investment | Shares | Bonds | Indexed deposits |
| Best for | Younger people who will invest the private pension for a long time in the hope of a higher return | Middle-aged fund members who want more stability on their balance | Fund members who are approaching retirement and want to minimise the risk of their balance |
| 10-year average net actual return | 4.1% | 2.7% | 1.3% |
Private Pension for fund members in Division B
Fund members in Division B can save into LSR’s Private Pension in the same way as other employees in Iceland. Fund members in Division B who are paid overtime and those fund members who have become premium-free can, however, pay an additional contribution into a private pension, and thus increase their pension savings.
-
For further explanation, employees in Iceland can pay a total of 8% of their total salary into a pension fund without tax being deducted from the premium. To make full use of it, a 4% premium is normally paid to a traditional pension fund and a 4% premium to a private pension fund.
Fund members in Division B only pay a premium to Division B from fixed daytime wages, holiday supplements, personal supplements and fixed shiftwork supplements. However, they do not pay a premium from overtime wages. thus, they do not accrue pension fund rights from such wages and do not fully utilise the possibility of 8% premium payment.
However, Division B fund members have the option to pay extra into a private pension from overtime wages to make up the 8% premium. This is best explained with an example:
A fund member in Division B that pays 4% into a private pension receives ISK 1,000,000 in total salary. ISK 800,000 are due to daytime work and fixed shiftwork, but ISK 200,000 are due to overtime.
Premiums for daytime work and fixed shiftwork (a total of ISK 800,000) are:
- 4% to LSR’s Division B (ISK 32,000)
- + 4% into private pension (ISK 32,000)
- =8% total premiums, ISK 64,000 of ISK 800,000
For overtime, however, no premiums are paid to Division B. The fund member can then decide to pay 4% additional premiums from overtime, which in this example is ISK 200,000 into a private pension to fully utilise the 8% authorisation. Then the overtime premiums will be:
- 4% into private pension (ISK 8,000)
- + 4% additional payment into private pension (ISK 8,000)
- =8% total premiums, ISK 16,000 of ISK 200,000, all into private pension
Fund members in Division B who have reached the 32 or 95-year rule and have therefore become premium-free can likewise pay an additional 4% of their total salary into private pension, since their premium payments to Division B have ceased. It is a very good option to significantly increase your pension savings after the rule is reached.
I am a fund member in Division B. How do I apply to pay extra into private pension?
On LSR's application for private pension savings, fund members in Division B can specifically request the payment of additional premiums to LSR's Private Pension.