A pension, in Faroese eftirløn, is a regular payment you can receive when you have stopped working because of age. When you become a pensioner, you may be eligible for three types of payments: work-related pensions, the labour market supplemental pension and the retirement pension. This section is mainly about work-related pensions. You will find information about the other types under quick links.
All individuals up to the Faroese state pension age of 67, with full tax liability in the Faroes, are required by law to save a portion of their salary in a pension scheme. Beginning in 2014 with at least 1% and increasing by 1% for each year, all individuals will be saving at least 12% of their salary by 2026 in a pension scheme. Nevertheless, it is possible to increase the contribution sooner, and many already contribute 12%.
Individuals born before 1 January 1954 are exempt from this requirement, but can make a voluntary pension saving.
You can start saving for a pension by joining a pension scheme with a pension provider. You will receive an account number from the pension provider, which you should give to your employer. Your employer is then responsible for contributing to the pension.
As of 1 January 2014, it is required by law that the pension provider is based in the Faroes. Find a list of all the pension providers in the Faroes under quick links.
Pensions are often included in employment contracts
As mentioned above, you are welcome to join a pension scheme of your choice. However, pensions are often a built-in feature of employment contracts today.
The legal requirements regarding pensions mean that every type of payment of wages is subject to an obligatory pension contribution; this also includes committee payments, secondary jobs, overtime work, holiday allowance and more.
The requirement of pension contributions is so concrete that if you do not contribute to a pension, your wages cannot be paid.
However, if you move to the Faroes for reasons of fixed-term employment, you can apply to be exempt from contributing to the compulsory pension scheme. Click the link Exemption to read more about this.
The pension is your personal property. However, you are not in charge of it, and you cannot withdraw it early. Nor can it be given away, be pawned or used to offset possible requirements from the pension provider.
The pension counts as a part of the joint estate when couples separate or get divorced. Annuity, however, cannot be repurchased.
Faroese residents, who are working abroad for a foreign employer and who, as a part of their employment contract, contribute to a foreign pension scheme, may be exempt from paying Faroese pension contributions off their wages earned abroad, if they meet the necessary requirements.
Find the application form under Forms.
Apart from the mandatory work-related pension schemes, there are other pension funds that individuals who reach pension age in the Faroes may receive.
Labour market supplemental pension fund
Individuals who have been registered in the Faroes for at least 15 years while between the ages of 15 and 67 can receive a proportion of the Faroese labour market supplemental pension equivalent to the number of years they have lived in the Faroes.
Read more about the labour market supplemental pension fund by clicking the link under quick links.
The retirement pension is a monthly payment that you can get from Almannaverkið when you turn 67, if you meet the requirements.
Read more about the retirement pension by clicking the link under quick links.
Studying in the Faroes
If you are a student in the Faroes and you have an income, other than the student grant, you are required to contribute the fixed amount of your wages to a pension scheme. You are not required to pay pension contributions off your student grant.
If you are a student abroad and have retained full tax liability in the Faroes, you are not required to pay pension contributions off the income you have earned abroad. However, if you are working in the Faroes during certain periods of time, such as during the summer holiday, you must contribute an amount of these wages to a pension scheme in the Faroes.
Please note that if the single payment of wages is so small that the pension contribution would be less than DKK 30, you are not required to make the pension contribution.