Pensions, health and long-term care

Abstract

Iceland has a pension system which has many characteristics commonly associated with the Scandinavian pension systems, while also retaining some of its own characteristics. The pension system is universal in coverage, with rights based on period of residence in the country. It has three pillars. The universal public social security part (Pillar I) is primarily tax-funded, while the occupational pensions (Pillar II) are contribution-based. The system is redistributive on the whole and succeeds well in alleviating poverty amongst the elderly and other pensioners, in comparison to other European societies. Despite the strains of the present financial crisis, the pension system remains mainly intact, and some reforms that were initiated in 2008 are still to some extent in effect, albeit with reductions and cost containments. Some reforms are still being planned such as a large-scale simplification of the social security system and some aspects of the vocational rehabilitation and activation system. While the Icelandic health care sector, which has had a very high quality level by international standards, is obviously also facing a very stringent test due to expenditure cuts, there are clearly some signs of success in preserving the security and quality of services to date. Waiting lists have actually been significantly reduced in 2009, and despite increased pressure on staff at various levels, there are also healthy signs of stamina and effort to do better. Plans for new buildings for the national University Hospital are an important sign of the goal of government and staff to fight to preserve the high standard of the Icelandic health care system, despite the temporary difficulties. The next two years will decide how well that goal will be achieved. By most measures, the long-term care sector in Iceland has a high level of service provision, including home help and nursing facilities. Still, there have been significant complaints in recent years about inadequate caring facilities, especially for the frail. Another frequent complaint is that too many elderly have to share rooms with strangers in homes for the elderly and in care homes for people in need of more intensive care. On the whole, one can say that the consequences of the financial crisis for living standards in Iceland have been very serious indeed. The government has aimed to alleviate the worst consequences, particularly directing its limited financial resources towards lower income households. This is reflected in social protection developments since the time of the crash in October 2008, such as the raising of the minimum pension guarantee and increases in general social security pension and benefit payments on 1 January 2009, some increases in the amount of the basic unemployment benefit, increases in child benefits and tax rebates for mortgage interests. This is also reflected in the distribution of the increased tax burden (against which low-income earners have largely been sheltered) and with the general aim of keeping the public welfare system intact. Difficult problems remain and, even though the economy may be bottoming out at the present time, the standard of living consequences are likely to continue to surface into the next year or two. Further tax increases and cuts in public expenditures seem inevitable in the next two years, in order to balance the state budget and to start paying debts. Iceland has indeed tried to shelter the more vulnerable groups with social protection measures.