Concerns grow over potential pension reductions for workers in Iceland as government plans change funding dynamics

Concerns are growing about potential reductions in pensions for workers and low-income individuals in Iceland as the government plans to cease compensating pension funds for unequal disability burdens. Þórey S. Þórðardóttir, director of the Icelandic Pension Funds Association, warns that if the government’s proposals move forward, it would significantly impact the pension funds for laborers.

The government intends to halt equalization payments to pension funds due to considerable disability burdens, as outlined in the proposed budget. These payments were introduced in connection with wage agreements in 2005 when disabilities began to weigh heavily on workers’ funds compared to other pension schemes.

The leadership of the Icelandic Confederation of Labour criticized these developments over the weekend, a sentiment echoed by Þórey, who states that these changes would adversely affect pension funds serving workers. She highlights that this could leave individuals with less pension than they had anticipated, directly affecting those who have contributed to these funds.

The majority of the government’s contributions have previously supported the funds facing the most significant disability burdens. Both the Minister of Finance and the Minister of Social Affairs have hinted at a review of the social security system alongside the discontinuation of equalization payments. However, Þórey argues this approach is misguided. She asserts that mixing different issues only complicates the matter, as pension funds still manage both trauma pensions and disability allowances, suggesting that these should not be conflated with changes to social security legislation.