Division of pension between spouses
Often, people in marriage or cohabitation have had varying degrees of opportunity to earn pension rights over their lifetime. One party has been active in the labour market, while the other party has been inactive to some or all extent. In such circumstances, an imbalance in the pension rights between the parties can be created.
In response to this, fund members of Icelandic pension funds in marriage, cohabitation or confirmed cohabitation are offered two options to equalise the status of cohabiting partners. On the one hand, there is the option to divide pension rights and on the other, pension payments. These are two different actions and it is important to study their effects well before deciding what is best for each person.
Differences in the division of rights and payments between spouses
| Division of pension rights | Division of pension payments | |
| When can you apply? | Before retirement and before the age of 65 | At any time |
| What is divided? | Rights while the parties were/will be cohabitating. Two types of division are possible: • Division of future rights • Division of accrued rights |
Total pension payments regardless of length of cohabitation |
| What happens upon death? | The surviving spouse retains rights for life under the division agreement | The surviving spouse receives 100% of their payments again, and the deceased's payments are cancelled |
| What is required to cancel a division agreement? | The consent of both parties and all pension funds is required to revoke a future division. Division that has already taken place cannot generally be undone. | Unilateral decision of either cohabitating partner |
| Can I be retired when I apply? | No, the possibility of dividing rights is cancelled if one or both spouses have started receiving a retirement pension from a pension fund. | Yes |
| Is it necessary to submit a medical certificate to apply? | Yes | No |
Learn more about the difference between the division of pension rights and pension payments
As you can see from the table above, there are certain fundamental differences between these two methods of division between spouses. Division of rights is actually a much broader action, because it is valid for life for both parties. That is, when one of the cohabiting partners dies, the other party retains the rights that the deceased had left to them, but does not get back the rights that the living partner had left to the deceased.
However, the opposite is true for division of pension payments. Upon death, the deceased's payments cease, but the surviving spouse receives 100% of their own payments again.
This fundamental difference also means that there are stricter conditions for the division of pension rights than for the division of pension payments.