Fund members may begin withdrawing their retirement pensions between the ages of 60 and 70. The pension is independent of other income and is paid to the end of life in accordance with the rights earned by the individual in question.
In the event of impaired ability to work and loss of income due to disability, fund members may be entitled to rehabilitation or disability pensions.
If a fund member passes away, the surviving spouse is entitled to a pension for at least five years.
As with regular wages, pension payments are taxed. There are two tax brackets.
On the first ISK 893,713 per month
On amounts exceeding ISK 893,713 per month
Notification must be sent as to which bracket income tax payments are to be in if the total income of the pension recipient, from the fund and others if appropriate, totals more than ISK 893,713 per month. The fund is responsible for paying the withholding tax, but each fund member must notify the fund of the proportion of the tax card he wishes the fund to use.
In 2018, the personal tax allowance is ISK 53,895 per month and the tax-free limit of pension recipients, therefore, is ISK 145,899 per month, i.e. the personal tax allowance divided by the tax percentage (ISK 53,895 / 0.3694).
For example, to avoid paying tax on pension payments from the fund that amounts to ISK 100,000 per month, 70% of the tax card must be used (ISK 100,000 × 0.3694 / ISK 53.895 = 0.685).
Pension recipients may use up to 100% of the unused tax card of a spouse for tax reduction purposes. On the demise of a spouse, pension recipients can use the tax card of the deceased spouse for 9 months as of the month of passing.