Social Security Contribution and Pension in Iceland (2026 Legal Guide) — Rules & Requirements
About this article
Sourced from Icelandic Acts of the Althingi, statutory instruments, and official guidance. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
Iceland has mandatory contributions to social security and pension funds:
Employer social security contribution (tryggingagjald):
- General rate: approx. 6.35-6.90% of total wages — paid in full by the employer. The exact rate changes annually and may include additional charges; check the current rate at skatturinn.is.
- An additional rate for seafarers: +0.65%.
- This is not deducted from your wages.
Mandatory pension contributions:
- Total minimum: 15.5% — employer 11.5% + employee 4%.
- The employee's 4% contribution is tax-deductible.
- Employees can make supplementary savings of up to 4%.
- Applies to all employees aged 16-70.
Other mandatory charges:
- The Construction Fund for the Elderly: 14,614 kr. (ages 16-69).
- The broadcasting fee: 22,200 kr. (ages 16-69, if annual income exceeds 2,617,618 kr.).
When does it apply?
- You are an employee aged 16-70 in Iceland.
- Your employer must pay the social security contribution on your behalf.
What to do if your employer is not paying the correct pension contributions in Iceland
- Check your payslip — make sure the 4% pension contribution is deducted and that your employer contributes 11.5% on top.
- Consider making supplementary savings — up to a further 4%, which your employer may match (depending on the collective agreement).
What should you NOT do?
- Don't opt out of mandatory pension savings — it is required by law.
- Don't confuse the employer's contribution with yours — the 6.35% social security contribution and the 11.5% pension are the employer's cost, not deducted from your wages.
About Tax Rights in Iceland
Income tax in Iceland is progressive in three brackets under lög um tekjuskatt (the Income Tax Act, Lög nr. 90/2003) and combines state tax and municipal tax (~14.94%). All residents aged 16 and over receive a personal tax credit (persónuafsláttur) that is transferable between spouses. Capital income is taxed at 22%. VAT (Lög nr. 50/1988) is 24% standard and 11% reduced — businesses register once turnover exceeds 2 million kr. Skatturinn (the tax authority) handles the assessment. You can appeal to yfirskattanefnd (the State Tax Board of Appeals) and from there to the district courts. Employers pay a social security contribution (tryggingagjald) under Lög nr. 113/1990.
Common Questions
What pension contributions are mandatory in Iceland?
The total minimum pension-fund contribution is 15.5% — the employer pays 11.5% and you pay 4%. The employee's 4% contribution is tax-deductible. You can make supplementary savings of up to 4%, which some employers match depending on the collective agreement. The mandatory contributions apply to all employees aged 16 to 70.
What is the Icelandic social security contribution that employers pay?
Tryggingagjald is the employer social security contribution — approximately 6.35 to 6.90% of total wages, paid in full by the employer. An additional rate of 0.65% applies to seafarers. This is not deducted from your wages. Check the current rate at skatturinn.is. It funds pensions, health insurance and unemployment benefits under Lög nr. 113/1990.
How do I check whether my employer pays the pension correctly in Iceland?
Look at your payslip: make sure the 4% pension contribution is deducted from your wages and that your employer pays an additional 11.5%. The 6.35% social security contribution and the employer's 11.5% pension contribution are the employer's cost, not a deduction from your wages. Don't opt out of mandatory pension savings — it is required by law.
What is the social security contribution and pension contributions right in Iceland?
Iceland has mandatory contributions to social security and pension funds:Employer social security contribution (tryggingagjald):General rate: approx. 6.35-6.90% of total wages — paid in full by the employer. The exact rate changes annually and may include additional charges; check the current rate at skatturinn.is.An additional rate for seafarers: +0.65%.This is not deducted from your wages.Mandatory pension contributions:Total minimum: 15.5% — employer 11.5% + employee 4%.The employee's 4% contribution is tax-deductible.Employees can make supplementary savings of up to 4%.Applies to all...
When does it apply — social security contribution and pension contributions?
You are an employee aged 16-70 in Iceland.Your employer must pay the social security contribution on your behalf.
What should I do if I believe my employer is not paying the correct pension contributions for me in Iceland?
Check your payslip — make sure the 4% pension contribution is deducted and that your employer contributes 11.5% on top.Consider making supplementary savings — up to a further 4%, which your employer may match (depending on the collective agreement).
What should you NOT do — social security contribution and pension contributions?
Don't opt out of mandatory pension savings — it is required by law.Don't confuse the employer's contribution with yours — the 6.35% social security contribution and the 11.5% pension are the employer's cost, not deducted from your wages.