Treasury reduces pension liabilities by ISK 19 bn

The Ministry of Finance and Economic Affairs confirmed today that an agreement had been reached with the Pension Fund for State Employees (LSR) concerning a transfer of ISK 19 bn in assets that were part of the failed financial institutions’ stability contributions. The transfer is based on an authorisation in the fiscal budget supplement for 2017, passed by Parliament on 30 December 2017.

The failed financial institutions’ stability contributions, which were delivered in connection with an exemption from the capital controls, included holdings in the commercial banks, bonds, listed and unlisted equities, loans, and various other assets. A special State-owned company, Lindarhvoll ehf., was entrusted with the administration and redemption of assets other than those relating to the commercial banks. The company’s tasks have been handled on the basis of a special agreement between it and the Ministry. The vast majority of the assets that Lindarhvoll ehf. was entrusted with liquidating have already been sold, with the proceeds reverting to the Treasury. The outstanding portion are not considered well suited to public sale in the manner employed for the assets sold by Lindarhvoll in the recent past.

For this reason, it is considered appropriate that LSR take over these assets, as the fund has the expertise needed to maximise the value of the assets and is not subject to any particular time limits with respect to asset management. The assets are transferred to the fund as a partial payment towards the Treasury’s obligations vis-à-vis LSR’s B-division. With this transfer, the value of the assets can be maximised and the associated cost minimised.

The Treasury remains liable for the obligations of LSR’s B-division, and this transfer does not affect that liability. If the assets do not deliver their current estimated value, this will increase the Treasury’s future obligations, but if their value exceeds the current estimate, this will have a positive effect on the obligations.