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All workers must pay into a pension fund, which is paid out at retirement age.
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The general rule is that the premium paid into a pension fund or reversionary annuity is 10% of the total salary package. The employee pays 4% of that amount, and the employer pays the additional 6%.
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The employee may also choose to make use of an additional savings package (viðbótarsparnað) in which the employee pays 4%, the employer pays 2%, and the federal government pays an additional 0.4% in the form of a tax discount.
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The aim of these savings options, and pension funds are to ensure compensation to retired persons, those disabled during employment, and life insurance survivor’s benefits for children and spouses
