Pension account withdrawals

You can withdraw your pension in any manner you choose from the age of 60. Your personal circumstances are the most important factor when considering the best time to withdraw your money.

Make sure you have signed up for private pension


Private pension is optional but available to everyone working in Iceland. If you deposit 2-4% of your monthly salary into a private pension scheme your employer is obligated by law to give you an additional 2%. That alone probably makes it the best type of savings in Iceland but additionally it is fully inheritable, exempt from capital income tax as well as reduction of social insurance pension and cannot be accessed by creditors in case of bankruptcy.

Your private pension is therefore a valuable asset that you should take very seriously and sign up for, if you haven’t already. There is no age limit regarding the permission to deposit a part of your salary. As long as you are working you can deposit 2-4% of your salary and get the 2% additional payment from your employer. It is therefore possible to deposit and withdraw funds simultaneously.

When should I withdraw my pension?


Your personal circumstances are the most important factor when considering the best time to withdraw your money. At the moment, as a response to COVID-19, anyone younger than the normally required minimum age of 60 can now withdraw their private pension. Please read this article on the matter before deciding weather it is the right option for you:

You should assess your total potential income from other pension funds and the Social Insurance Administration (TR) before you make any decisions.

Íslandsbanki can support you by offering you advice. Please feel free to contact our Investment and Pension advisors by telephone: 440-4900 or by email: sereign@islandsbanki.is

Some points for consideration

  • Once 60 years old you can withdraw as much or as little as you wish, by regular monthly payments or individual withdrawals
  • Many individuals withdraw their pension when they reach retirement age and use the funds to compensate for lost income
  • The tax bracket on your savings can vary, depending on the withdrawal period
  • You can delay withdrawing your pension and continue making returns on your pension plan
  • Returns on your private pension do not affect any income from TR and are tax free

Do I have to withdraw my entire pension at the same time?


You make all the decisions on how and when you would like to withdraw your pension after the age of 60. You can withdraw the total amount, withdraw the amount you need when you need it or divide the withdrawals into monthly payments into your account.

You can make changes to your withdrawal method by contacting Íslandsbanki Investment and Pension services via email: sereign@islandsbanki.is or by telephoning one of our advisors. These changes can take time to process and we will need to know in advance.

Please note that the tax owed can be extensive if you withdraw the entire amount at once.

How do I withdraw my pension?


You simply fill out an application and hand it into your nearest Íslandsbanki branch.

Our branch staff and Investment and Pension advisors will give you the advice you need on how to fill out the application and how to withdraw your pension. Please note that a citizens of countries outside the European Economic Area (EEA) sign a separate form.

How does taxation work?


Income tax is paid when you withdraw your pension. Tax brackets vary, and many people decide to withdraw their pension over a longer period (more than one year) as a result.

The difference between tax bracket 2 and 3 is currently 9.3%. The highest tax bracket is enforced when your total income (wages, pension, social insurance and private pension) reach a total of ISK 893,713 per month.

All up to date information on taxation is provided by the Revenue and customs authority:

Property Tax


Will the withdrawal of my pension affect my property tax discount?

Pensioners often have the right to a discount on their property and sewage tax but this can be affected by an increase in income.

The withdrawal of your pension can in some cases affect these rights. Contact the office of your municipality for answers regarding your property tax discount.

Will the withdrawal of my pension affect payments from the Social Insurance Administration (TR)?


The withdrawal of your pension does not affect these payments. However, withdrawing your pension and investing it elsewhere could affect these payments.