LSR pension liability rose by 64.1 billion kronur
Monday 5th October 2026 on 11:16 in
Iceland
The accrued pension liability of the B division of LSR rose by 64.1 billion kronur last year, reaching 1,236 billion kronur at the end of 2025, according to an opinion article published by Morgunblaðið. The article says the increase poses a challenge for state finances in the coming years.
At the end of 2025, the division’s liability was matched by 217.46 billion kronur in net assets for pension payments, equal to about 17.6% of the total. Claims against employers for pension increases accounted for 708.27 billion kronur, or about 57.3%, while the accrued state guarantee stood at 311.1 billion kronur, or about 25.2%.
The division’s total liability grew by 5.5% in 2025. The article attributes much of the increase to a 10.1% rise in the index used to adjust pension payments and liabilities. The index measures changes in public employees’ daytime wages, which directly affect the fund’s liabilities.
The division’s obligations include benefits members have already earned and benefits they are expected to earn before retirement. Only 0.7% of the total liability relates to rights members are expected to accrue in the future. The article also reports that net outflows from the fund reached 35 billion kronur in 2025, reducing its assets.
Under the law governing LSR, the B division can claim from employers the portion of pension increases that exceeds the first pension payment. Where a pension recipient worked for more than one employer, the payment is divided according to the rights earned with each employer. These claims are recorded as assets outside the balance sheet and disclosed in the accounts.
The state began making additional payments to the B division in 1999 to help it meet its long-term obligations and avoid running out of assets, which would have transferred all pension payments to the state. The article says the payments significantly strengthened the division’s finances and that, without them, it would have exhausted its assets in 2015.
The state paid 10.4 billion kronur toward its obligations to the fund in 2025. A further 282 million kronur was paid in additional contributions. If no further payments are made after the end of 2025, an actuarial assessment indicates that, all else remaining unchanged, the state will have to cover pension payments from the B division in full from 2031.