Icelandic pension funds operate in accordance with Act no. 129/1997 (in Icelandic) on Mandatory Pension Insurance and on the Activities of Pension Funds, which entered into force on 1 July 1998. The basic legislation of most financial market entities is founded on the regulatory framework of European directives incorporated into the EEA Agreement. However, this does not apply to the Icelandic pension system as the regulations of the pension funds are largely based on a special Icelandic regulatory framework.
Act no. 129/1997 is in twelve chapters and applies to all pension funds and depositories of pension savings as further stipulated in the Act.
The Central Bank of Iceland maintains forward-looking and risk-oriented supervision of the activities of pension funds, analyses the main risk factors in their operations, and monitors market developments. The Central Bank of Iceland also monitors the compliance of pension funds with the laws that apply to their activities and that appropriate measures are taken when necessary. The CBI has placed increased emphasis on good governance within pension funds, risk management and internal controls.