Grindavík Residents Demand Pension Funds Lower Interest Rates, Loan Repayments

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A group of Grindavík residents visited the offices of Gildi pension fund to demand that Gildi and other funds to lower interest rates and repayments on housing loans, RÚV reports.

The major commercial banks have agreed to lower interest rates and repayments on housing loans for three months due to the natural disaster in Grindavík, and now residents are demanding of pension funds to do the same.

Statements from the funds indicate that they are investigating whether this is possible.

Addressing a group of Grindavík residents yesterday, December 4, director of Gildi, Árni Guðmundsson, stated: “I have said it many times, this matter is under review, it’s not concluded, and until it is, we cannot say anything more about it,”

When asked why the pension funds have taken longer to respond than the commercial banks, Árni stated: “Different rules and laws apply to us compared to the banks. Entirely different regulations and laws apply to us, and we just need our time to ensure that this is legally permissible for us.”

Hörður Guðbrandsson, chairman of the Grindavík Labor Union, stated to RÚV: “We received no real answers. They say it’s under review and it has been under review for an incredible amount of time, and they can’t find any reasons to support it. We were here protesting last Thursday and got the same answers. They just have no answers for us, and we’ll keep coming here until they come up with something sensible for us.”

Hörður also mentioned that the protesters received a poor reception, as they had trouble entering the building, the police were outside, and security guards were inside.

With Rising Life Expectancy, Pension Benefits Lowered by 10%

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As of July 1st, the Pension Fund for Icelandic State Employees (LSR) will lower its benefits by approximately 10%. In an announcement on the benefit cut, LSR stated that it was in part due to rising life expectancy.

The Ministry of Finance and Economic Affairs released new life expectancy tables at the end of 2021, which assume that Icelanders will live considerably longer than previously estimated, and that younger generations will have a longer life expectancy than older generations.

Read More: Cabinet to Receive 6% Raise Amid Inflation and Interest Hikes

“Someone who is in their sixties today will live two years longer than previously estimated. But someone who is 25 years old today is expected to live four years longer than previously estimated,” stated Harpa Jónsdóttir, Executive Director of LSR. She continued: “And the thing is, we are still going to pay for the same length of time, but there is no additional money coming into the pot. So, we just need to take the same money and spread it over more years.”

Pension funds must now adapt to these changes and anticipate paying pensions for a longer period than previously calculated. On average, these changes will result in a decrease of 9.9% in the monthly entitlements of those currently contributing to the fund. For those that receive pensions from the fund and do not have state insurance, the payments will decrease by 4.1% from July 1st of the upcoming year.

Read More: Central Bank Raises Key Interest Rates by 1.25%

The changes will apply to those who will receive payments from the fund in the future, while the entitlements of those who already receive payments from the fund will decrease by about 4%.

According to LSR, “the reduction in rights and pension payments is a significant measure for the fund but is nevertheless necessary given the current situation.”