Icelandic Pension Funds Regain Assets Skip to content

Icelandic Pension Funds Regain Assets

By Iceland Review

The pure assets of the Icelandic pension funds, which are used for paying pension benefits, are approaching what they were before the banking collapse of October 2008.

Photo by Páll Stefánsson.

A new report by the Central Bank of Iceland shows that the pure assets of the pension funds in September 2009 amounted to ISK 1,735 billion (USD 13.8 billion, EUR 9.3 billion), compared to ISK 1,772 billion (USD 14.1 billion, EUR 9.5 billion) in the same month of 2008. One month later, they had dropped to ISK 1,554 billion (USD 12.4 billion, EUR 8.3 billion), Fréttabladid reports.

The Central Bank estimates the recovery since October 2008 at ISK 181 billion (USD 1.4 billion, EUR 1 billion), while the funds’ asset depreciation after the collapse was estimated at ISK 217 billion (USD 1.7 billion, EUR 1.2 billion).

The report indicates that the banking collapse had a milder effect on the Icelandic nation than what the most pessimistic forecasts had predicted.

Pension funds in other parts of the world suffered worse blows, although different calculation methods must be taken into account.

It is believed that the pension funds of the OECD (Organization for Economic Co-operation and Development) member states lost one-fifth of their assets from the beginning of 2008 until the end of October that year.

Arnar Sigurmundsson, chairman of the National Association of Pension Funds (LL), confirmed that the Icelandic pension funds are approaching their size in ISK before the banking collapse.

“A large part of the funds’ assets has continued to deliver a good yield and more is paid into the funds than is paid out of them. It is very pleasing that we are regaining our position in ISK as of one year ago,” Sigurmundsson said.

However, he added that the pension funds did suffer a harsh blow with the collapse of the Icelandic banks and that the Central Bank’s statistics don’t tell the whole story.

The accounts of the pension funds in relation to the collapse have yet to be settled and uncertainty surrounds the final estimation of their assets.

The largest blow was a loss in domestic stocks but profits from long-term development of assets abroad have largely made up for that loss.

The Althingi parliament’s Economic and Tax Committee is currently discussing the idea of adopting a temporary capital tax on pension funds, from which they are currently exempt. Annual revenue for the state treasury from such taxation methods could amount to ISK 25 billion (USD 199 million, EUR 134 million), Fréttabladid reports.

However, the taxation is not without flaws. “Only some of the generations are paying for it,” said Tryggvi Thór Herbertsson, the Independence Party’s representative on the committee.

Click here to read more about new ideas on taxation.

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