25 July 2019

When is the best time to start a personal pension plan?

The chance that your State Pension will be enough to live on later is small. Especially if you want to maintain your current standard of living. That is why it’s good to have a nest egg. But when is the best time to start saving for your pension?

With a personal pension plan you can top up your State Pension amount with additional savings. The government encourages this kind of saving by offering tax relief on your pension plan, under certain conditions.

There are only three requirements for starting your plan:

  • You have to be at least 18 years old and no older than 64.
  • You must have a taxable income
  • You must be living in Belgium, or in another European Economic Area member state, when you sign the contract.

The earlier you start your retirement savings, the higher your potential return will be. And by starting early, you’ll benefit from the accruing interest and income.

Not yet begun saving for your retirement? There is probably a good reason: your income was directed to paying off your mortgage, providing for your growing family, or buying a new car… And perhaps you have already seen off your 40th, 50th, or 60th birthday. But none of this prevents you from starting now. After all, the best time to begin is always today. The tax advantages are available provided that your savings plan runs for at least 10 year. That means you can start a pension savings plan at age 55 and still benefit fully from the tax advantages.

Pension Planning: How Ilse, Paul and Lander tackled it

Ilse started saving for her retirement when she was 25 and receives a 30% pension tax reduction on her annual contribution of €980. The pension savings fund she chose gives an average actuariel return of 3% per year.

Paul is 45 years of age and has a pension savings insurance plan with a guaranteed interest rate of 0.65% at the moment of subscription. Each year he deposits €980 and enjoys 30% tax relief on that sum.

Lander has just turned 65 and does not have a pension plan. But on each of his past forty birthdays he has deposited €980 into his savings account, which has had an average interest rate of 0.2% (note: most Belgian savings accounts currently have interest rates of 0.11%).

  • Younger than 50? Contact ING as soon as you conveniently can to determine your investor profile. If you want a potentially high return, a pension savings fund is the right plan for you.
  • Between 50 and 55? You can still build up a solid amount of capital and enjoy years of tax relief. Start saving in a personal pension plan before your 55th birthday and pay pension tax when you turn 60 (the anticipatory levy). You will also enjoy more tax relief in the final years of the contract (between the ages 60 and 64), which are completely tax free.
  • Between 55 and 65 years old? At this point, the focus shifts from return on investment and towards pension tax advantages. If you start a pension savings plan after 55, the contract must extend for at least 10 years. In which case, you would be paying the anticipatory levy not at age 60, but ten years after your first deposit.
  • Saving for your pension after 65? Saving and/or investing for your pension is always an option, but starting after 65 means foregoing the benefit of tax relief.

Start your retirement savings plan with ING today, so you can look forward to carefree enjoyment of all your plans in the future.