Rising benefit costs put welfare system sustainability at risk

A submitted article published by Morgunblaðið says the rapid rise in welfare payments to residents of foreign origin is putting the financial sustainability of the welfare system at risk.

The article, by Arnar Arinbjarnarson, Róbert Bragason and Kristinn Sv. Helgason, examines a new response from the minister of social affairs and housing to a question from MP Nanna Margrét Gunnlaugsdóttir.

In October 2025, 15,661 people received total monthly payments from the Social Insurance Administration exceeding 400,000 Icelandic krónur before tax. Of these, 1,828 were residents of foreign origin. A total of 1,678 received between 400,000 and 600,000 krónur, 127 received between 600,000 and 800,000 krónur, 15 received between 800,000 and 1 million krónur, and eight received more than 1 million krónur.

The figures do not include child-support payments for residents of foreign origin that the state has to write off.

Disability-related payments rise sharply

Total payments by the Social Insurance Administration to residents of foreign origin for disability-related benefits rose from 1.3 billion krónur in 2010 to more than 16.6 billion krónur in 2025. The payments include disability pensions, rehabilitation pensions, sickness and rehabilitation payments, and all additional entitlements connected to those benefit categories.

The average annual increase was nearly 19%, while prices rose by 4% over the same period.

Of the 16.6 billion krónur paid in disability-related benefits in 2025, 1 billion went to residents of African origin. People from Morocco received 406 million krónur.

Residents of Asian origin received more than 3.8 billion krónur. The largest amounts went to people from Thailand, who received 670 million krónur; Syria, 589 million; the Philippines, 489 million; Palestine, 446 million; Vietnam, 321 million; and Iraq, 304 million.

Residents of American origin received nearly 1.6 billion krónur, including 284 million paid to people from Venezuela. Disability-related payments to residents from Venezuela were first recorded in 2022.

The largest share went to residents of European origin, who received more than 10.2 billion krónur. Nearly half of that amount, 4.8 billion krónur, went to residents from Poland.

Total disability-related payments by the Social Insurance Administration were 113 billion krónur in 2025, compared with 27.7 billion in 2010. There were just over 30,000 benefit recipients, including nearly 4,600 people of foreign origin. They accounted for 15% of all recipients, compared with 5% in 2010.

Between 2010 and 2025, the share of first- and second-generation immigrants in Iceland’s total population rose from 8.95% to 21.7%.

If the number of benefit recipients of foreign origin had increased at the same rate as the immigrant population, the number would have reached about 2,300 in 2025 instead of nearly 4,600. The total cost would then have been 8.3 billion krónur rather than 16.6 billion. The article describes the difference as a snowball effect.

The proportion of people aged 18 to 66 receiving disability-related payments was particularly high among people from some countries. The highest rate was 28% among residents of Moroccan origin. In 2025, 92 residents from Morocco received a total of 406 million krónur, or 4.4 million per person.

The corresponding rates were 26% for Kosovo, 19% for Syria, 17% for Iraq and 16% for Palestine. The rates were 4% for Poland, 2% for Lithuania, 2% for Ukraine and 1% for Romania.

Old-age pension payments also increase

In 2025, the Social Insurance Administration paid nearly 5.8 billion krónur in old-age pensions, including all related additional entitlements, to residents of foreign origin. The comparable amount in 2010 was 419 million krónur.