The control has thrown an exception.

Icelandic law requires that all working people between the ages of 16 and 70 to pay into a pension fund.

The mandatory pension contribution shall be 12% of salary before tax. According to most union wage agreements, the employer contributes 8% and the employee 4%. Self-employed workers pay both contributions, i.e. 12% of salary before tax

Frjálsi Pension Fund

Frjálsi Pension Fund is the oldest independent pension fund in Iceland, founded in 1978. The fund has more than 55,000 fund members and has assets of more than ISK 200 billion.

Frjálsi Pension Fund is open to all wage earners who are not contractually obliged to be members of other pension funds. Frjálsi Pension Fund can also receive supplementary pension savings into a private pension fund.

The role of Frjálsi Pension Fund is to guarantee pensions for its fund members until the end of their lives and to protect them and their families against loss in earnings in the event of disability and death.

Advantages of Frjálsi Pension Fund

  • Some of the mandatory premium is paid into your private pension
  • More benefits
  • Reasonable pension loans
  • Choice of investment options
  • Choice of co-insurance options
  • Flexible payouts
  • The fund has won international awards

Most pension funds in Iceland are co-insurance funds where all premiums go into a non-inheritable co-insurance fund. Frjálsi Pension Fund is a mixed private and co-insurance fund. While the co-insurance fund guarantees you a minimum pension, some of the premiums you pay also go into a private fund. The private pension is fully inheritable and gives you the opportunity to take early retirement or to boost your income during your early years of retirement, giving you even greater financial freedom.

If you require any further information about the fund please contact Arion Bank’s financial advisers on +354 444 7000 or send an e-mail to

Frjálsi Pension Fund - a multi-award winning fund

In recent years Frjálsi Pension Fund has participated in competitions run by Investment Pension Europe (IPE), one of the most respected pension industry magazines in Europe. Every year IPE presents awards to those pension funds which its panel of experts believes have excelled in their home country and abroad.

  • Best pension fund in European small nation in 2017
  • Best pension fund in European small nation in 2016
  • Best European pension fund with funds of less than €1 billion in 2015
  • Best European pension fund with funds of less than €1 billion in 2014
  • Best pension fund in European small nation in 2014
  • Best institutional investor in real estate in category “Rest of Europe” (40 European countries) in 2014
  • Best pension fund in European small nation in 2013
  • Second best European pension fund with funds of less than €1 billion in 2013
  • Second best pension fund in European small nation in 2012
  • Best pension fund in Iceland in 2011
  • Second best pension fund in European small nation in 2011
  • Best pension fund in Iceland in 2010
  • Best pension fund in Iceland in 2009
  • Second best pension fund in European small nation in 2009
  • Second best European pension fund with funds of less than €1 billion in 2009
  • Best European pension fund in category DB/DC structuring/strategies in 2005

The fund was also named pension fund of the year in Iceland for 2014 by the magazine Acquisition International.

The experts at IPE have cited Frjálsi’s strong returns in difficult market conditions, its professional practices for devising investment strategies, transparency, structuring and new services for fund members.

Insureance plans 

When becoming a member of Frjálsi Pension Fund you choose the insurance plan best suited to the areas you want to focus on in terms of insurance protection, flexibility of payouts and inheritability of your mandatory pension savings. There are two paths available: Freedom Path and Inheritance Path. The main difference is in how high a proportion of the obligatory pension contribution goes into the co-insurance fund and how much goes to into the personal pension, which is divided into an open account and a limited account.

Investors who want greater financial freedom when they retire and want a large proportion of the contributions to be inheritable should choose an insurance plan where part of the contributions goes into the co-insurance fund and part goes into the personal pension, e.g. the Inheritable Path or the Freedom Path. 

Compare insurance plans

It is important to compare all options in order to be able to make an informed decision on your choice of insurance plan. By using the pension calculator you can compare insurance plans to see how much it is estimated you will own and how much will be paid out upon retirement. 

If no insurance plan is selected, contributions are placed in the Freedom Path, which is the automatic choice according to the fund’s articles of association. 

Inheritance Path

Inheritance Path – for investors who want maximum inheritability.

The Inheritance Path offers the greatest degree of inheritability; 72% of obligatory pension contributions go into the personal pension which goes to the heirs upon a fund member's death. The personal pension in the Inheritance Path is divided into an open account and a limited account. Limited accounts are subject to stricter payout rules and payouts are therefore less flexible than with the Freedom Path. 

Freedom Path

Freedom Path – for investors who want greater flexibility when the pension is paid out.

The Freedom Path offers the greatest flexibility with respect to payouts. The fund member can have more money at their disposal in the first few years following retirement as approximately 34% of obligatory contributions go into the open account and payments can be made from this account from the age of 60. There is less inheritability than in the Inheritance Path.

Investment plans 

When becoming a member of Frjálsi Pension Fund you select the investment plan for your personal pension which best suits your age, risk tolerance and risk appetite in either mandatory or supplementary pension savings. 

Choice of investment plans

Frjálsi Pension Fund offers a choice of investment plans with different levels of risk to meet different needs. When choosing an investment plan it is advisable to consider how long it is until payouts are made, what your asset position is and what your attitude to risk is.
In Life Plan your assets are automatically transferred between investment plans and the risk of the portfolio thus decreases with age. Life Plan is recommended.

Frjálsi 1

Who is Frjálsi 1 designed for?

In Frjálsi 1 the proportion of equities is the highest of the plans belonging to Life Plan. A high proportion of equities promises good long-term returns but at the same time there is a greater likelihood of short-term volatility in returns. Frjálsi 1 is therefore the riskiest plan belonging to Life Plan.

Frjálsi 2

Who is Frjálsi 2 designed for?

In Frjálsi 2 the proportion of bonds is higher than in Frjálsi 1. Therefore long-term returns will be more even in Frjálsi 2 than in Frjálsi 1.

Frjálsi 3 

Who is Frjálsi 3 designed for?

Frjálsi 3 aims to minimize fluctuations in returns by having the majority of the portfolio in bonds.

Frjálsi Risk

Who is Frjálsi Risk designed for?

Frjálsi Risk has the highest proportion of equities and equity-linked products. Therefore long-term returns are likely to be higher but at the same time more volatile. As the name suggests, Frjálsi Risk is the riskiest plan and it does not belong to Life Plan. Note that while the capital controls are in force, new beneficiaries cannot choose Frjálsi Risk nor can they transfer their accumulated savings into Frjálsi Risk.