Established in 1978, Frjálsi Pension Fund is one of Iceland's oldest non-mandatory pension funds, with over 69,000 members. With assets of €3bn it is the country's fifth largest pension fund. For many years, it has grown significantly faster than the Icelandic pension system, thanks to solid investment returns, an attractive structure and an emphasis on innovative technical solutions.

To give members maximum flexibility, Frjálsi offers a hybrid structure encompassing both collective defined contribution (CDC) and defined contribution (DC) plans. The CDC segment is a target benefit plan, providing a lifelong mandatory inflation-linked pension. As investment risk is borne by Frjálsi’s members, it follows a conservative investment policy to minimise the risk of benefit reductions. The DC plan offers members the choice of four investment policies with different risk-return profiles, and considerable flexibility for withdrawals.

Over 80% of Frjálsi’s fixed income portfolio is inflation-linked, providing a hedge to the CDC plan’s obligations. The fund has recently been focusing more on foreign assets and alternative asset classes, as well as traditional classes.

Frjálsi emphasises minimising cost without compromising returns, so is constantly separating necessary turnover costs from unnecessary expenses, endeavouring to lower the latter. Its growth is largely due to innovative technological solutions. It is the only pension fund to offer members a holistic view of their savings and all major pension actions through an app. The app’s main goal is to meet members’ needs and strengthen engagement by improving accessibility to pension information and actions relating to their pensions, while appealing to potential fund members. It helps reduce costs by making back-end processing more efficient with robotics, ensuring quick service and minimising errors. Strong cyber defences have also been integrated into the system.