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Icelandic pension legislation delayed

ICELAND – A bill raising the government’s contribution to the civil servants’ pension fund and extending the pension rights of the self-employed has been delayed in parliament, the Althingi.

Under the proposed law, the government’s contribution to State Employees Pension Fund was to be raised to 8% of a civil servant’s salary from 6%. Public employees make a 4% contribution.

The bill was going to cover marginal groups, including the self-employed and workers who are not members of trade unions, who pay into the Collection Pension Fund, lifting the contribution paid by their companies or employers to 8% from 6% and thereby granting those individuals an increase in rights, according to a trade union official.

“The trade unions did not oppose the bill but we pointed out that this was a right that our members had had to negotiate through collective bargaining and ‘buy’ by forgoing a increases in wages not be granted by law,” he added.

The intervention also raised legal issues about whether the government had the ability to legislate pension rights for those groups who were working for private companies not the public sector and were not bound by collective agreements.

Following the trade union intervention finance minister Árni Mathiesen postponed consideration of the bill.

Meanwhile, an increase in the contribution rate for Iceland’s private sector industry-wide pensions to 12% of an employee’s salary from 11% may be under threat as a result of an increase in the Icelandic inflation rate.

The increase was due to come into force at the beginning of next year with the lifting of the amount paid by an employer to 7% from the current 6%. The contribution paid by an employee would stay at 4%.

The increase to 11% came into force at the beginning of this year under a collective bargaining agreement between the trade unions and the employers association negotiated in March 2004.

Under the collective agreement, the trade unions have the right to renegotiate all collective agreements if the inflation rate rises above an annual rate of 3%. Currently the rate is 4.5%.

The trade union confederation can conduct a mid-term review on 15 November. Should it decide to exercise its right it would affect all collective agreements, including the 2004 pact on pensions.

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