Abstract
The pension system in Iceland is chiefly characterised by the operation of occupational pension funds. Although the minimum contribution rate is set by law, the system is not a pure defined contribution system as the minimum benefits are also stipulated in the pension law. The system is thus a hybrid between a defined benefit and a defined contribution system. The age distribution among the Icelandic population is relatively favourable, compared with continental Europe, and the number of retirees, compared with the working age population, is currently low and is estimated to remain so for the next few decades. The asset-building nature of the current pension system therefore makes it unlikely that a higher dependency ratio will result in a fund shortage or require higher taxes to finance retirement schemes in the future. This paper describes the Icelandic pension system in detail.
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