ICELAND - Proposed legislation from the Icelandic Ministry of Finance has been delayed which should have introduced amendments to the Pensions Act, including the transfer of benefits to spouses and ex-partners.
Árni Mathiesen, the Icelandic minister of finance, presented a Bill in 2007 which contained a number of amendments to increase flexibility in the transfer of pension rights and the payment of old age pensions.
The provisions included changes to the period of notice related to supplementary pension insurance or optional pension saving, and suggested giving pension funds the authority to increase the flexibility of membership by accelerating or delaying the beginning of the pension period.
In addition, the Bill proposed the transfer of acquired pension rights to spouses or ex-spouses, and the right for foreign citizens to a refund of premiums paid into optional pension accounts.
The plans suggested pension funds would also be authorised to participate in transactions in an organised credit market with securities, although it stated these credit transactions should not exceed 25% of net pension fund assets.
However, following the presentation of these plans, the economic and taxation committee of the Althingi - the Icelandic Parliament - then proposed the 25% limit should be reduced to 12.5% and the authority on these transactions should be delayed until the beginning of 2009, even if the rest of the changes would be effective immediately.
As a result of this development, the Ministry of Finance has now revealed the amending Bill could not be approved and passed into law before the end of the latest Althingi session, as it had only reached its second reading when the Althingi went into recess in May.
The ministry warned in its latest newsletter from the Ministry warned despite the changes made by the committee, "it remains to be seen whether the bill passes into law when the Althingi reconvenes", which is usually 1 October.
Iceland currently operates a three pillar pension system - a means-tested, tax financed public pension scheme; mandatory funded occupational pension schemes and a third pillar of voluntary private pension savings.
The mandatory pension fund regime came into force in July 1998, and under the Pensions Act all employees and self-employed people between the age of 16-70 tare required to become a member of an approved pension fund and contribute a minimum of 10% of total earnings.
But the contribution can be split into two parts, with the first part ensuring a minimum benefit, for a member who saves for 40 years, of a monthly lifetime pension equivalent to 56% of monthly wages, as well as a minimum disability and survivors pension.
The second part of the contribution can either be used for acquiring additional pension rights in a pension fund or in individual pension accounts, run by banks, insurance companies, securities undertakings and pension funds.
However, the amount of the split depends on the member's chosen pension fund - as some funds can define it so all of the 10% contribution goes to cover minimum benefits, while another might only need 8% for the minimum and the member can save the remaining 2% in a supplementary scheme.
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