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The Supreme Court confirms Pension Fund of Commerce changes
28. November, 2024The Supreme Court confirms that changes to the bylaws of the Pension Fund of Commerce are in accordance with the Icelandic Constitution, the European Convention on Human Rights, and the laws on Pension Funds.
Kristín Edwald, attorney, represented the Pension Fund of Commerce, with contributions from attorneys Stefán Orri Ólafsson and Hjalti Geir Erlendsson.
The legal issue at hand was whether the Pension Fund of Commerce was allowed to modify the pension rights of individuals who have not yet begun receiving their pensions, based on new assumptions about life expectancy. This situation arose after new guidelines for assessing life expectancy—mandated for use when calculating pension obligations—took effect in December 2021. These updated mortality tables reflect the trend of an aging population and indicate that fund members are living longer, albeit to varying degrees based on their age. This represents the most significant change in the operational assumptions of pension funds since the pension fund laws were enacted in 1997, considerably affecting how pension obligations are calculated. Specifically, for the Pension Fund of Commerce, these adjustments increased the fund’s pension obligations by ISK 77.
In response to the new guidelines, the Pension Fund of Commerce decided to reduce benefits for younger members more than for older ones, as younger members are expected to receive pensions for a longer duration. A fund member subsequently filed a lawsuit against the Pension Fund of Commerce, seeking to have these changes declared invalid. However, the Supreme Court rejected this request, affirming that the Pension Fund of Commerce could modify the pension rights of individuals who have yet to start receiving their pensions according to the new life expectancy assumptions. This ruling sets a precedent for numerous other pension funds that have changed their bylaws similarly.
The full judgment can be read here.
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