Icelandic pension funds have reported solid performance and continued growth in 2025, despite a volatile global environment marked by geopolitical tensions and market uncertainty.

The State Employees Pension Fund (LSR), the country’s largest pension fund, saw its net assets rise to just under ISK 1,664bn at the end of 2025, representing an increase of more than ISK 97bn over the year.

The fund delivered a nominal return of 6.6 per cent and a real return of 2.7 per cent in 2025, with its long-term performance remaining stable, averaging a 3.8 per cent real return over the past decade.

Similarly, SL Pension Fund reported “acceptable” returns in what it described as a challenging market environment, maintaining a strong financial position underpinned by prudent investment policy and robust risk management.

The fund achieved a 6.9 per cent return in its mutual insurance division, equivalent to a 3.1 per cent real return, while long-term performance remained strong, with an average real return of 4.9 per cent since 1991, comfortably above its 3.5 per cent benchmark.

SL’s portfolio remained well diversified, with foreign assets accounting for 47.3 per cent of holdings, alongside domestic bonds (41.2 per cent) and equities (6.5 per cent).

The fund also reported growth in pension payments and membership.

Pension payments rose by 10.7 per cent to ISK 11.1bn, while the number of pensioners increased by 4.4 per cent to 23,509.

Premium income remained stable at ISK 6.8bn, with 13,245 contributors and 142,739 individuals holding pension rights within the scheme.

Meanwhile, Birta Pension Fund highlighted the impact of geopolitical instability on markets, noting that tariff disputes and ongoing conflicts in Europe and the Middle East contributed to heightened volatility during the year.

Despite this, Birta reported efficient operations and cost discipline, achieving a 2.1 per cent real return in 2025 and a 3.4 per cent average real return over the past 10 years.

The fund’s net assets increased to ISK 737bn, up from ISK 696bn in 2024, while premium income rose to ISK 25.7bn.

Meanwhile, pension payments also grew significantly, rising by 11.7 per cent to ISK 24.7bn, alongside a 4.4 per cent increase in the number of pensioners to 19,599.

However, Birta noted some pressure on its funding position, with actuarial assessments showing liabilities exceeding assets by 6.04 per cent, largely driven by updated life expectancy assumptions.

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