The managing director of Iceland’s Frjálsi pension fund, Arnaldur Loftsson, has called for employees to be automatically enrolled into the country’s additional pension savings system.

Loftsson believes the government should consider introducing this policy as part of its review of the country’s pension system, which has just been ranked second in the world by the Mercer CFA Institute Global Pension Index 2024.

It is currently mandatory for workers in Iceland of eligible age to pay 4 per cent of their salary into a pension fund, with employers making an additional contribution of 11.5 per cent.

On top of this, workers can choose to contribute up to 4 per cent of their salary to additional pension savings and employers are then obliged to contribute an additional 2 per cent to these savings, providing the employee’s contribution is at least 2 per cent.

Loftsson believes enrolling employees into additional pension savings, with an opt-out clause, would benefit both individuals and society as a whole. In 2023, around 60 per cent of employed individuals in Iceland contributed to additional pension savings.

He cites the UK as an example of where auto-enrolment has been a success and believes if implemented in Iceland, the participation rate of additional pension savings would increase.

“More people would have more in their hands after retirement, and the loss of income that individuals often experience when transitioning from the labour market to retirement would be reduced. No one would be forced into the savings because people would have the choice not to participate,” he said.

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