Disability burden cuts ‘unjust’, warns Iceland’s SGS union

The Federation of General and Special Workers in Iceland (SGS) has warned that planned government cuts to disability-burden equalisation could cost manual and service-sector workers up to ISK 25m each in lifetime pension income, calling the shortfall a “merciless injustice” that undermines faith in Iceland’s pension system.

In a resolution adopted at its 10th congress, SGS accused the government of acting in “direct contradiction” of a 2005 commitment to equalise the disability burden across pension funds, a mechanism designed to offset the higher rate of disability among manual workers in physically demanding jobs.

Under the government’s draft 2026 budget, the ISK 4.6bn annual state contribution to the equalisation scheme is set to be withdrawn entirely.

SGS said this would leave a funding gap of more than ISK 10bn each year, forcing manual workers’ pension funds, which already face disproportionately high disability costs, to absorb the loss directly from members’ benefits.

According to the federation, members of manual workers’ pension funds already receive up to 20 per cent lower pension entitlements than others for the same contribution levels.

The difference equates to between ISK 85,000 and ISK 116,000 less per month in retirement income, or ISK 20–25m over an average lifespan after age 67, according to the comparison website, Aurbjörg.

“This is nothing less than systemic injustice that undermines trust in the Icelandic pension system,” SGS said, warning that if the contribution is not restored, it will demand that the state assume full responsibility for financing the disability component of pensions.

SGS vowed to “use all available means” to fight for justice for working people and said it would “never accept anything less” than full equality between workers’ pension funds and other funds.

The move follows a similar warning last month from the Icelandic Confederation of Labour (ASÍ), which said the government’s plan to abolish the contribution would “significantly impact” the pension rights of working and low-wage members.

ASÍ described the reform as the dismantling of a long-standing social partner agreement and urged the government to negotiate an alternative mechanism with unions and pension funds.

The equalisation scheme, first introduced in 2005, was intended to distribute the cost of disability pensions more evenly across Iceland’s pension system.

In response to the broader changes, Iceland’s largest pension fund, Gildi, has also warned that funds could be forced to reduce old-age pensions to accommodate higher disability costs. Despite growing opposition, the current government has confirmed it will proceed with the planned cuts.



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