The Constitution and the Use of Pension Funds

Abstract

This article discusses the constitutional limitations on requiring Icelandic pension funds to utilize the money deposited in them in a certain manner. The constitutionality of different kinds of state intervention on pension fund spending (permitting vs. requiring the pension funds to participate in schemes that either do or do not yield returns for the funds) will be examined. The examination will primarily be based on the Constitution’s article 76 on social rights, article 72 on property rights and unwritten constitutional requirements of legality, proportionality and equality in legislation. It turns out that art. 76 of the Icelandic Constitution carries little weight in this area. However, the protection of property entails that it is constitutionally untenable to either permit or require pension funds to participate in schemes or projects which do not yield a return. The unwritten constitutional principles also lead to the conclusion that some state intervention would be unconstitutional. The conclusion is that the statutory requirement that everyone participate in pension funds leads to considerable constitutional limitations on state intervention in pension fund spending.