The boards of Iceland’s Frjálsi Pension Fund and the Farmers' Pension Fund (LSB) have signed a letter of intent to begin formal discussions on merging the two funds.

If a merger goes ahead, the combined fund would have total assets of around ISK 622bn, based on the assets as of 31 October, of which Frjálsi's assets account for ISK 576bn and LSB’s amount to ISK 46bn.

“The goal of the merger is to utilise economies of scale to reduce operating costs, enhance service and information provision to fund members and employers, reduce operational risk, and at the same time strengthen the funds' asset and risk management,” the funds said.

It is hoped that negotiations on a merger will be concluded before the end of this year. If an agreement is reached, an extraordinary meeting will be called for members to vote on the merger.

Earlier this month, members approved a vote to merge the Frjálsi Pension Fund with the Pension Fund of the Icelandic Dental Association (LTFÍ), which will be completed by the end of the year.

It will see Frjálsi take over all rights and obligations of LTFÍ fund members, provided that the Ministry of Finance confirms changes to LTFÍ's articles of association.

November has also seen members approve the merging of Lífsverk and Almenni.
The funds will be merged on 1 January 2026, and the new fund will be known as the Almenni – Lífsverk, pension fund.

The new fund will be Iceland’s fifth largest, with ISK 667bn in assets (based on figures at 31 December 2024).

It follows a long-term trend of consolidation in the Icelandic market. A recent report published by the Central Bank of Iceland noted that 96 funds operated in 1980, but just 21 remain, which will be further reduced once these latest mergers are complete.

The three largest pension funds control around half of the total pension fund assets in Iceland.

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