The first pillar provides coverage based on years a person has resided in Iceland.
Since there is no specific tax on wages to finance the system, general government
revenues cover the cost of benefit payments. A person receives credit for each year
he or she resided in Iceland, and receives a proportionally higher benefit amount
based on each year he or she lived in Iceland. Iceland bases benefit amounts on the
ratio of years a person resided in Iceland to the years between ages 16 and 66, multiplied
by a flat-rate figure calculated annually by the Icelandic government. Additional
supplements to this amount exist based on the person’s income, care for dependent
children, and for various social assistance purposes.