By law, all wage earners have the right and the duty to be members of the pension fund of the profession in question. Employers likewise have the right and the duty to withhold premiums from the wages of wage earners and submit to the pension fund together with their matching contribution.
Premiums to the pension fund
Premiums to the pension fund are minimum 12% of total wages, i.e. income from day time work, extra work, night work, supplemental payments and holiday payments. Fund members aged 16-70 pay 4% of their entire wages to the fund and employers pay minimum 8%.
Fund member monitoring of premium deposits
Fund members are encouraged to monitor that their premiums are deposited in the pension fund. The fund issues a statement twice a year, in March and September, showing the deposits made to the fund. The statement shows the total points earned by the fund member together with an itemisation of the payments made since the last statement was issued. Fund members should compare these statements with their pay slips to make sure that the correct amounts have been deposited.
If no statement is sent from the fund, this may indicate that no deposits have been made. Entitlements can, therefore, be lost if the fund is not notified of the suspected default of deposit. The fund member bears great responsibility in this respect. Fund employees monitor premium deposits but no-one is more capable of doing so than the fund member. The rights of fund members to a pension are calculated in Icelandic króna. The rights are subject to the premium deposited in the fund each time.
Payments to the fund begin when the wage earner has reached the age of 16 (in the next month after the birthday month). When the fund member reaches the age of 70, he stops paying a premium to the fund (last payment in the birthday month), given that the member does not earn pension rights after that time.
Gild – Pension Fund has undertaken to collect premiums for the following trade unions:
• Efling stéttarfélag
• Félag hársnyrtisveina
• Verkalýðsfélagið Hlíf
Employers are under obligation to withhold from the wages of employees their union fees for the union in question in accordance with the rules stipulated in collective wage agreements.
Employers are also under obligation to make payments into the sickness fund, holiday allowance fund and vocational training fund of the said unions the premiums that the entities in the labour market negotiate from time to time and in accordance with the rules stated in collective wage agreements.
Further information for employers as regards premiums may be found on the website Eflingar stéttarfélags. Press here.
Employers, including independent employers and those who are not members of unions, are under obligation to pay 0.10% of the total wages of all their employees to VIRK Rehabilitation Fund. The payment obligation was adopted as of 1 September 2011 with the amendment of Act No. 129/1997 on Mandatory Insurance of Pension Rights and on Activities of Pension Funds.