Disability pension if work capacity is reduced
Disability pension from LSR’s Division A helps to compensate for loss of income if you have to reduce your work ratio or retire due to illness or accident.
In order to be entitled to the payment of a disability pension, the fund's company physician must assess disability as at least 40% for three months or longer.
Children of fund members who receive a disability pension may be entitled to a child pension if certain conditions are met.
Disability Pension of LSR’s Division A
- If work capacity is reduced by 40-100% for 3 months or longer
- Paid monthly until work capacity is regained or the fund member retires
- Children of fund members may be entitled to a child pension
- Extrapolation can increase the value of rights
Amount of disability pension
The amount of disability pension depends on the disability assessment and the rights the fund member has earned.
Example:
Accrued rights: ISK 500,000.
Assessment of disability: 50%
Monthly disability pension: 50% of 500,000 = ISK 250,000.
When assessing rights, a fund member may be entitled to extrapolation, which can significantly increase the value of the rights, especially for junior fund members. When extrapolating, the fund member's rights are based not only on the rights that have already been earned, but also on the rights that the fund member would have earned through continued premium payments until the age of 65. The rights are then calculated based on the average premium payments of the last three years.
The condition for extrapolation is that the fund member has paid into the fund for at least three of the last four calendar years and paid premium for at least six months out of the last twelve months before the loss of capacity. When assessing this premium payment period, premiums that have been paid to other pension funds are also taken into account.
A simple example of extrapolation:
A 35-year-old fund member with ISK 500,000 salary per month receives 75% disability assessment. When loss of capacity occurs, they have accrued ISK 100,000 ISK in monthly rights.
If the fund member is not entitled to extrapolation, their disability pension payments will be:
75% of 100,000 = ISK 75,000 .
If the fund member is entitled to extrapolation, it is calculated how much rights the fund member would have accumulated from the age of 35 to 65 based on the average payments of the last three years and added to the total entitlement. Let's assume that the extrapolation is ISK 188,000 in this example.
Then the monthly disability pension payments are calculated like this:
100,000 + 188,000 = 288,000
75% of 288,000 = ISK 216,000
Disability assessment
In order to be entitled to a disability pension, the LSR's company physician must assess the disability as at least 40% for three months or more. For the first five years, the disability assessment is based on the fund member's ability to perform the job they have held and granted them membership in the fund. After that period, the disability assessment is based on the ability to do general work.
The combined pension, child pension, social insurance and/or other wage payments can never be higher than the loss of income that the fund member has actually suffered due to loss of capacity. When assessing the loss of income, the average salary of the last three calendar years before the loss of capacity is considered, and the standard salary is compared with the income of fund members after the loss of capacity.
It can be set as a condition for the payment of a disability pension that a fund member undergoes rehabilitation that can improve their health. A fund member may have to undergo a disability reassessment after a certain period of time, and information about this is published in a letter to the fund member when payments begin.
Necessary documents for a disability application
- Completed and signed application
- Detailed medical certificate, no older that three months.
- Please note that you do not need to apply for a disability pension from all pension funds where you have rights, only the one you paid into last