Efling will not take part in any consultations on changes to the system for equalising disability burden between pension funds unless the government guarantees contributions to ensure full equalisation at least until the end of 2026, in order to allow time to develop a new arrangement for equalisation. The government’s plan to abolish its contribution to the equalisation of disability burden between pension funds, entirely without consultation with stakeholders and without any plans for achieving a comparable level of equalisation, is completely unacceptable.
This is the substance of Efling’s statement on the abolition of the equalisation contribution for differing disability burdens of pension funds, which has been submitted to the Parliament’s Budget Committee. Workers and other manual labourers are at greater risk of losing their health than others, which results in their pension funds carrying a higher disability burden than the funds of other occupational groups. This means that the pension rights of other members in those funds are reduced by amounts amounting to hundreds of thousands of krónur annually.
This situation was addressed in 2005 when an agreement was reached that the state would contribute to equalise disability burden between pension funds. The government now intends to abolish this contribution without any compensation. This is intolerable, and Efling will not remain idle.
Efling’s full statement can be read below.
Attack on workers’ pension rights
Efling’s statement on the abolition of the equalisation contribution for differing disability burdens of pension funds
Manual labourers (mainly workers and seafarers) generally work under conditions where the risk of accidents or health loss is higher than in other occupations. Since pension funds with mandatory membership are linked to occupations, the disability burden is distributed very unevenly between funds. This means that pension funds where workers form the majority of members must devote a larger share of their finances to disability pensions than other funds. This reduces the retirement pension rights in those same funds.
The funds with the highest disability burden are Gildi, Festa, Stapi, the Pension Fund of Vestmannaeyjar, and the Pension Fund of Rangæingar. Gildi is the largest of these funds and carries the heaviest disability burden.
This disparity between pension funds means that the funds of workers and seafarers cannot pay their members as high retirement pensions as funds with a lower disability burden, amounting to tens of thousands of krónur per month, if nothing is done to equalise this difference.
Background
Because of the great injustice involved, an agreement was made in 2005 between the parties behind the pension funds (the Confederation of Labour and the Confederation of Employers) and the state that the state would provide an annual contribution to equalise the disability burden between pension funds. The contribution was financed with a 3.25% surcharge on the payroll tax base, levied on employers’ wage payments.
Last year, the then government reduced the contribution and announced its planned abolition in 2026. The current government appears intent on maintaining those plans, and therefore, no allocation is foreseen for this item in the 2026 budget.
This is being done without any consultation with workers’ organisations or employers’ organisations and without any alternative arrangement in place that could achieve the goal of full equalisation of disability burden between pension funds. For the government to unilaterally break the agreement made in connection with the 2005 collective agreements is unacceptable.
Consequences
If the equalisation contribution is discontinued under the current system, members of Gildi will receive about ISK 50,000 less in monthly retirement pensions than members of funds with the lowest disability burden. This amounts to around ISK 600,000 annually.[1]
Such inequality is indefensible. It severely undermines the consensus that has prevailed around the pension fund system and additionally disrupts the sustainability of workers’ pension funds. The consequences of abolishing the contribution would fall most heavily on women workers.
Efling will not take part in any consultations on changes to the system unless the government guarantees contributions for full equalisation of disability burden at least until the end of 2026, in order to allow time to develop a new arrangement with full equalisation of disability burden between different pension funds.
[1] Based on ISK 550,000 monthly wages at age 25, with modest increases until age 65. Retirement pension rights in Gildi, the largest pension fund of workers and seafarers, would fall by 5.5% if the equalisation contribution is abolished without a new equalisation arrangement being introduced.