Should I withdraw my savings?
Private pension savings are generally restricted until the beneficiary reaches 60 years of age. The government's new provision, in response to Covid-19, involves temporary authority to withdraw these savings regardless of age, to the maximum amount of ISK 12 million. The solution is intended to assist individuals who have suffered loss of income due to the Covid-19 pandemic.
It is important to keep in mind that disposable income decreases upon retirement in most cases. Private pension savings are a good way to make up the difference. The savings can also be useful if an individual chooses to reduce his or her working hours after 60, or even quit work, before reaching retirement age.
Private pension savings is fully owned by the beneficiary and is inheritable. Another important factor is that private pension savings cannot be seized to satisfy debt in the case of bankruptcy much as other assets, such as real estate, cars and bank deposits.
Under usual circumstances, individuals cannot withdraw private pension savings until 60 years of age. This also applies to foreign nationals who relocate from Iceland to another EEA country. The government's temporary solution allows for the temporary withdrawal of private pension savings by foreign nationals who have relocated to another EEA country. Foreign nationals, who move from Iceland to a non-EEA country, can as before withdraw their entire private pension upon relocation.
Important to think it through
It is up to each individual to decide whether to take advantage of this temporary authorisation to withdraw private pension savings. The importance of the opportunity to withdraw these savings in full or in part to individuals who suffer loss of income due to Covid-19 is indisputable, especially where no other savings exist.