ICELAND -- Two mergers of Icelandic pension funds have been proposed while the possibility of a third is being discussed.

A plan to merge Lifidn, the pension fund for electricians, hotel and catering staff, and Samvinnu lifeyrissjodurinn, the pension fund for co-operatives, will be put to a vote of their members in late May, according to Fridjon Sigurdsson, Lifidn’s managing director.

“We are proposing this because a bigger pension fund is more cost effective and it will enable is to increase out service to our members and sponsors and have more money for marketing,” Sigurdsson added.

The two pension funds are about the same size and a combined fund would have assets under management of IKR50-55bn(€680m).

Meanwhile, in April a merger of Almenni Pension Fund and Laekna lifeyrissjodur, the doctors’ pension fund, will be put to a general meeting of their members. Both are run by Islandbanki, the country’s second-largest financial group.

There union is an attempt to increase efficiency and reduce costs and risk, according to Gunner Baldvinsson, who is the general manager of both funds.

Market observers see the proposal as representing an addition to Almenni, which includes musicians, technicians, architects and travel guides among its members and which had assets under management of IKR33bn at the beginning of the year. Laekna has AUM of IKR19bn.

“What is interesting about our proposal is our new system for building up the pension fund,” said Baldvinsson. “We will provide disability and dependents’ pension rights” he said.

He also explained that members’ premiums would be kept in a separate account and when they apply for a pension the fund would be used to buy an annuity to provide a pension.

“So we are not making promises based on assumptions that fluctuate, and so will not have to change rights from time to time,” Baldvinsson added.

“This will enable us to follow a different investment strategy for those who arte saving and those who are receiving a pension. This has not been tried in Iceland before.”

IPE also understands that a far bigger merger, between Lifeyrissjodur verslunarmanna, the pension fund of commerce and Iceland’s largest private sector pension fund, and Sameinadi lifeyrissjodurinn, itself the result of the merger of eight pension funds, is being discussed.

The initiatives are part of a consolidation trend among Icelandic pension funds. Negotiations for a proposed merger of unskilled workers’ fund Framsyn and seamen’s fund Sjomanna are nearing completion.