11 January 2021
Belgium’s pension pillars
Our pension system has four pillars. The (modest) pension that you will receive from the State is just one of them. Our overview of all four pillars outlines the other ways to put money aside for your retirement.
The first pillar: the statutory pension
The statutory pension is the pension that you receive from the State when you retire if you had paid employment. The amount varies according to several factors:
- the number of years worked, or equivalent periods (for instance, parental leave)
- the salary that you received
- your status (employed, self-employed or civil servant)
The second pillar: the supplementary or extra-legal pension
- Are you an employee? In that case, your employer may fund a group insurance scheme or a pension fund. A portion of your salary will be put into a pot which is invested by a pension institution. Your employer also makes contributions to this pot. Employers are not obligated to provide this benefit and the contribution amount is also not fixed. If you don’t have this option or a limited group insurance scheme you can opt for a private supplementary pension for employees (VAPW).
- Are you a self-employed person? Then one option open to you is the private supplementary pension plan which can attract a tax advantage. Pensions for self-employed persons are, on average, lower than those of employed workers.
- Are you a civil servant? Then it depends on your situation. Contracted civil servants sometimes have the benefit of a group insurance scheme, although this is not the case for statutory civil servants. Pensions for civil servants are, on average, higher than those of employees.
The third pillar: the individual pension savings plan
The individual pension savings plan allows you to top-up your future pension and can attract a tax advantage. By making regular contributions to the plan, it grows along with your capital. A pension savings plan is even more interesting thanks to the tax reduction that you can get if you meet certain criteria (up to 25% of the maximum amount of 1,270 EUR in 2021). You can have a combination of solutions (a pension savings plan & long-term savings) in this pillar. With long-term savings you can also enjoy a tax advantage of up to 30% of the amount deposited if you meet certain conditions. There is a greater tax benefit to be had from long-term savings. This is because the maximum amount that you can deposit in 2021 is 2,350 EUR. Please note: your fiscal maximum for long-term savings could be lower because the maximum also depends on your professional income, and/or to what extent you benefit from a tax advantage on your home loan.
- Pension savings insurance. You benefit from guaranteed capital and a guaranteed return; however, this is limited in the current environment of low interest rates. In this case, you would choose for a Branch 21 Savings insurance plan.
- The pension savings fund. The capital is not guaranteed but the returns may be higher. A potentially higher return does mean that this solution carries more risk. Your capital will be invested in shares, bonds and liquid assets.
- Long-term savings. You benefit from guaranteed capital and a guaranteed return, but this is limited in the current environment of low interest rates. As with pension savings insurance you would select a Branch 21 savings insurance plan.
Different fiscal regulations and taxes apply to long-term savings than to pension savings insurance plans. Want to learn more about the differences?
The fourth pillar: individual savings and investments
The fourth pillar is made up of all the money you have worked to put aside, such as savings accounts or a property investment. The first three pillars may not be enough for you to be able to enjoy your retirement fully. Now that the interest on savings has been reduced and will be for years to come, investing for the future might be an attractive option. You can start from as little as 25 euros per month.