Gildi Pension Fund was created in 2005 by the merger of Framsýn Pension Fund and the Seamen’s Pension Fund. The lead-up to the merger was short, or just over a year, because in April 2004, the boards of the two funds entered into an agreement to have the feasibility of a merger investigated. A discussion committee was appointed, and following its work, a merger was approved at the Annual General Meetings of Framsýn Pension Fund and Seamen’s Pension Fund, which were held on 27 April 2005. After the AGMs, an inaugural meeting was held where it was agreed that the new fund would be named Gildi Pension Fund and that it would officially begin operations on 1 June 2005. Árni Guðmundsson was subsequently appointed Managing Director.

Gildi’s first Chairman of the Board was Ari Edwald, and in his address to fund members in the fund’s Annual Report after the first year of operation, he said about the merger: “I think it is already the opinion of most people that the merger of the funds was a stroke of luck.” In his address, Ari spoke about the importance of strengthening the Fund’s ability to manage assets in a complex environment where a larger part of the Fund’s assets will need to be invested abroad and developed risk protection needs to be applied. “Last but not least, the goal is for the Fund to provide good service and for its operation to be as cost-effective as possible,” he also said.

The first Board of Directors of Gildi Pension Fund. From left: Sigurður Bessason, Konráð Alfreðsson, Friðrik J. Arngrímsson, Þórunn Sveinbjörnsdóttir, Chairman Ari Edwald, Höskuldur H. Ólafsson, Vice-Chairman Helgi Laxdal and Sveinn Hannesson.

At the end of May 2014, the Board of the Westfjords Pension Fund approached the Board of Gildi and requested formal discussions on the merger of the funds. Gildi’s Board agreed to the request, and after negotiations that took place in late summer, the merger agreement was approved by the boards of both funds on 19 September. The merger of the funds came into effect on 1 January 2015. In the address of Þorstein Víglundsson, the then Chairman of the Board, in the Fund’s Annual Report for 2015, he said, among other things: “The merger has gone well, and I believe that it will be beneficial for fund members. It is clear that the operation of smaller pension funds is comparatively somewhat more expensive than larger funds such as Gildi, and the former members of the Westfjords Pension Fund will benefit somewhat from the merger. The joint fund will be stronger.”

Solid Foundation

If you look back even further, you can see that Gildi Pension Fund is based on an old but solid foundation. The Seamen’s Pension Fund was established by law in June 1958 and began operations the same year. The prelude to the establishment of the fund was that in 1957, there was a major wage dispute between trawler fishermen and fisheries. In order to mediate the dispute and prevent a direct price increase or a strike, the government reached an agreement with the Reykjavík Seamen’s Association and promised to work for the establishment of a special pension fund for trawler fishermen in exchange for them not terminating the purchase and wage agreements.

The Framsýn Pension Fund began operations on 1 January 1996. It was created by the merger of the Dagsbrún and Framsókn Pension Fund, the Hlíf og Framtíðin Pension Fund, the Sókn Pension Fund, the Factory Workers’ Pension Fund, the Restaurant Employees’ Pension Fund and the Industrial Workers’ General Pension Fund. All these funds had a long and interesting history.

Gildi in Numbers

Gildi’s total assets have increased rapidly since the establishment of the fund in 2005. At the end of the first operating year, they amounted to just over ISK 181 billion, but at the end of 2021, they amounted to more than ISK 916 billion. The reason for this great growth lies not least in good returns; the net nominal return of the fund in 2021 amounted to 17.8%, while the net real return amounted to 12.4%. At the end of 2021, the average net real return for the previous ten years was 7.1% and 4.8% if a twenty-year period was considered. Returns are obviously very important to fund members, and returns and a strong infrastructure make Gildi a powerful sponsor of its fund members.

Size and Scope

When the size of pension funds is assessed, their net assets are usually considered. Based on that measure, Gildi is the third largest pension fund in Iceland, with, as previously mentioned, more than ISK 916 billion in assets at the end of 2021. But the portfolio only tells part of the story. The number of fund members also has a lot to say, as it is necessary to keep track of the rights of all those who have rights with the fund, collect premiums from active fund members, process applications from those who want to start receiving pensions, grant loans and much more. The number of people who have some rights with the Fund was 251,920 at the end of 2021. No pension fund comes close to Gildi, but the second largest in this context is the Pension Fund of Commerce (Lífeyrissjóður Verzlunarmanna). If the operations are examined based on the number of active fund members on one hand and those who receive a pension from the Fund on the other hand, Gildi is the second largest pension fund in Iceland. Active fund members, i.e. those who paid premiums to the Fund in 2021, totalled around 52,859, and around 26,500 received a pension from the Fund in the same year.

Board of Directors and Member Associations

The Fund’s Board of Directors has eight members. Four are elected on behalf of fund members and four are nominated by the Confederation of Icelandic Employers. The term of office is two years, and half of the seats for Board members and alternates are voted for annually. Representatives of fund members and employers chair the Board alternately for one year at a time. The Board is in charge of the fund and must discuss all major decisions regarding Gildi’s strategy and operations.

Nine unions are members of the Fund, and all employers with operations in the professions for which the unions have entered into collective wage agreements are under obligation to pay the pension premiums of their employees to Gildi. The unions that are members in Gildi are:

• Sleipnir Drivers’ Association
• Efling - trade union
• The Metal Workers’ Union in Ísafjörður
• Félag skipstjórnarmanna
• Icelandic Seamen’s Union
• Federation of Icelandic Seamen (SSI)
• The Icelandic Union of Marine Engineers and Metal Technicians (VM)
• Verkalýðsfélagið Hlíf
• Verkalýðsfélag Vestfirðinga

The Operations

Gildi is a traditional pension fund that has three main functions: to receive premiums, invest the funds of fund members and then pay them a pension.

Gildi’s senior management consists of the Managing Director, the Chief Investment Officer, Office Manager and the Chief Legal Officer, which is also the Deputy Managing Director. The senior management manages the day-to-day operations of the Fund on behalf of the Board. The operation of the Fund is further divided into four main divisions as well as support divisions. The premium division is responsible for receiving and collecting premiums from fund members. The division is also responsible for collecting the contributions of several unions that are members of the Fund. Asset management manages the Fund’s assets, while the pension division receives pension applications from fund members, calculates their rights and ensures that they are paid, whether it is retirement, disability or spouse’s or child pension. Gildi also operates a private equity division, and fund members have a choice of three different investment options within the division.

Human Resources

The environment in which the country’s pension funds operate is becoming more and more complex and the operations more extensive, and the operation is therefore considerably more complicated than the simple scenario above indicates. Gildi employs numerous experts who carry out various projects in several sub-divisions. The part of the operations that has grown the fastest in recent years is lending to fund members, and a special division within the Fund deals with borrowers.