Icelandic pension funds compare favourably on costs and returns

Icelandic pension funds have delivered strong returns while keeping costs low by international standards, according to an opinion article published by mbl.is. Their weighted cost ratio was 0.55% of average assets in 2025, consisting of operating costs of 0.16% and investment fees of 0.39%.

In monetary terms, operating costs totalled 13.9 billion Icelandic krónur, while investment fees amounted to 33.6 billion krónur.

Comparing costs with foreign pension funds is difficult. Operating costs generally fall as funds grow, giving large foreign funds an advantage over Icelandic funds. Icelandic pension funds also provide extensive insurance coverage, including disability, spouse and child pensions. The administrative costs associated with these benefits make comparisons with large European funds less favourable to the foreign funds.

Comparison with the Netherlands

The article compares Iceland with the Netherlands, the only country to rank higher than Iceland in the Mercer pension index. A study by Dutch pension consultancy Bell found that Dutch pension funds had an average cost ratio of 0.48% of average assets in 2024.

However, the Dutch figure does not include trading fees. Adding those fees would raise the ratio slightly, bringing it roughly level with the Icelandic figure for 2025. Dutch pension funds also provide less extensive insurance coverage, meaning the comparison favours Icelandic funds, the article says.

Low costs and strong returns

Organisation for Economic Co-operation and Development data provides another comparison. The OECD includes fewer cost categories than are included in the figures for Iceland and the Netherlands, putting Iceland’s pension fund cost ratio at 0.218% in 2024.

Among 41 countries that provided data on operating costs and investment fees for that year, Iceland had the fifth or sixth lowest ratio. The median was 0.55%.

Costs must also be assessed alongside returns. Higher costs can reflect greater investment expertise, which may lead to better returns for fund members. According to the OECD’s latest report, Iceland’s average real return over the 10 years from 2015 to 2024 was 3.7%, the fourth highest among 31 OECD pension systems.

The article concludes that Icelandic pension funds remain subject to criticism and oversight by their members, but international comparisons indicate that they have delivered strong returns without high costs. The author, Andrés Þorleifsson, is a lawyer with the National Association of Pension Funds.