Pension Funds in Iceland to Cut Back on Payouts Skip to content

Pension Funds in Iceland to Cut Back on Payouts

By Iceland Review

Some of Iceland’s largest pension funds are expected to cut back their members’ payouts by ten percent this spring because of their poor financial position after the collapse of the banking system last fall.

The Icelandic króna. Copyright: Icelandic Photo Agency.

According to Fréttabladid, the pension funds in question are Gildi, Sameinadi lífeyrissjódurinn, Almenni lífeyrissjódurinn, Stafir, Lífeyrissjódur Vestfirdinga and Festa.

However, most pension funds will not cut back the payouts for their members. Managing director of the National Association of Pension Funds Hrafn Magnússon estimated that the average cut would be around five percent.

On January 1, 2008, new temporary regulations on pension funds took effect, involving that it would not be necessary to compromise the rights at a negative acturial position if it was less than 15 percent. The benchmark used to be ten percent.

The acturial position indicates the ability of pension funds to live up to their future pension commitments.

According to Morgunbladid, the real yield of pension funds in 2008 was much worse than official data indicates.

Preliminary numbers from the Financial Supervisory Authority (FME) state that the real yield was negative by 21.45 percent in general, but if imminent write-offs are taken into account, the earnings are much worse.

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