TL;DR
4%
Employee portion (you)
11,5%
Employer portion (you)
15,5%
Total contribution
Payment deadline: last business day of each month. FreelancePay pays automatically.
1) How Pension Works for Contractors
In traditional employment the employer pays 11.5% and you pay 4%. As a contractor you are your own employer — you pay both portions.
2) Choosing a Fund
You can choose any legally approved pension fund. The main funds are:
You can change funds later — but accumulated rights typically remain in the original fund.
3) Monthly Payments
- Deadline: last business day of each month
- Paid through the pension fund employer portal
- You must register as an employer with the fund
- You need an employee number from the fund
- Late payments accrue interest from the due date
- The fund monitors arrears and can pursue collection actions
4) Optional Extra Savings (Viðbótarlífeyrissparnaður) 💡
In addition to the mandatory contribution, you can save an extra 2–6% of income in an optional pension savings account. This is an excellent tax strategy.
Tax deductible
The extra savings are deducted from your taxable base — you save on both pension and taxes.
Savings rate
2–6% of income (maximum 500,000 ISK/year fully deductible).
Flexibility
You can start and stop at any time.
5) What Happens If You Miss Payments?
Arrears recorded
The fund records arrears when the due date passes.
Interest accrues
Late interest accrues from the due date — daily.
Collection action
The fund can pursue collection actions and refer to a debt collection agency.
6) FreelancePay Reports and Pays Automatically
- Pension contribution calculated automatically (11.5% + 4%)
- Paid to the pension fund on time — never late
- No need to access the pension fund employer portal
- Taxes and social security also paid automatically
- Year-end summary ready for tax return
- You focus on work — we handle the pension payments
