Occupational Pension Scheme for Employees
Aanvullend pensioen voor werknemers
Coverage
Voluntary participation
- There are two different systems of pension commitments: (a) a collective scheme for (a group of) employees; (b) an individual pension commitment through a pension agreement (for personal reasons, not due to staff category; this can be in addition to an existing collective system, but may not be granted within the last 36 months before retirement).
- In case of a collective scheme: sectoral (Collective Labour Agreement, CLA) or company pension schemes (through group insurance or pension fund independent from the employer (i.e. Institutions for Occupational Retirement Provision)).
- Distinction between ‘ordinary’ and ‘social’ commitment. The latter provides, in addition to the accrual of a supplementary pension (sometimes also including death/disability pension), a so-called 'solidarity component' on the basis of which a number of additional solidarity benefits are offered (savings and further contributions are made for the supplementary pension during certain periods of inactivity, or current benefits are increased); the solidarity component must always be organised by persons other than the organiser or the sectoral organiser.1
- An employer is not obliged to offer a supplementary occupational pension to his/her employees.
- If an employer introduces a pension plan, he/she will determine which employees can benefit from the pension plan. Sometimes a pension plan applies to the entire staff, in other cases only to a certain group of employees. It is also possible that different pension plans coexist for different categories of personnel.
- If, at the level of a business sector, a sectoral plan has been introduced by means of a collective labour agreement, in principle all employers active in this business sector are obliged to participate in this sectoral plan; the employer can opt out of the so-called ‘pension part’, but not of the so-called ‘solidarity part’ (i.e. when the pension plan is also a social plan).
- It is possible that the Collective Labour Agreement (CLA) allows a company or a category of companies not to participate in the sectoral plan, but is itself responsible for building up a supplementary pension for its employees. The pension granted by the company in the event of an opting out must at least reach the level of the sectoral plan.
- The Collective Labour Agreement (CLA) may also provide that certain companies fall outside the scope of the Collective Labour Agreement.
- An employee who was already employed by that employer at the time of the introduction of the supplementary pension cannot be obliged to join the scheme, unless it is provided for by collective agreement.
Financing
General finances
- Personal pension plans based on contribution payments and capital revenues with minimum guarantee.
- A pension capital (system of capitalisation) based on the investment of deposits by the employer and/or person involved and increased by the investment returns.
Contribution payments
- Contributions paid by employer and/or employee (deducted from salary); paid at regular intervals.
- No fixed share/contribu-tion rate; amount of contribution payments can be chosen freely within predefined range.
- No minimum contribution, but contribution ceiling: annual amount is EUR 1,630 (in 2021) or 3% of the gross salary received in the previous two years (if this exceeds the annual amount).
Tax support & incentivising strategies
- Tax deductions for contributions paid by employer under certain conditions and tax exemption for employee.
- Employee contributions: tax reduction (between 30% and 40%) and insurance tax (except social pension commitments).
- Employer’s contributions: deductible as professional expenses (payment may not exceed 80% of last gross remuneration after deduction of all statutory and supplementary pensions) and number of special levies, i.e. insurance tax and special levy on social security (except for solidarity component).
Administration
- Every entity setting up a scheme is obliged to choose between concluding a group insurance or setting up a pension fund.
- Obligation to outsource to an external partner.
- This scheme is installed by an external pension institution (insurer or pension fund) or collective pension commitment (for all employees).
- This scheme is known as ‘pension scheme through pension regulations’.
- The ‘Financial Services and Market Authority’ (FSMA) monitors pension institutions' compliance with social legislation as well as the financial health and appropriate organisation of pension funds.
Qualifying Conditions
- The payment of the supplementary pension is linked to the statutory retirement pension (exceptions possible if provided for in pension regulations).
- Conditions are regulated in pension regulations. The law states a number of elements that must be respected in the conditions of each pension plan: e.g. no waiting period may be imposed and no discrimination may be made on the basis of, for example, gender, age, nationality and part-time employment.
Benefits
Pension payments
- The payment can be made via one lump-sum capital payment or spread over time with a periodic (monthly or annual) interest rate or, in certain cases, a combination of both.
- Defined benefits or defined contributions system with two derivatives: the ‘cash-balance plan’ (between defined benefit and defined contribution system, savings are allocated on a specific day with the organiser guaranteeing a predetermined return) and the so-called ‘cafeteria plan’ (employee has freedom to decide on what the contribution can be spent (between the types of coverage as death, living, invalidity, etc.) and can choose the investment reserve while the organiser does not decide how the contribution should be spent).
- For defined benefit pension plans, there is only a statutory guaranteed return on employee contributions.
- In the case of defined contribution and cash balance type pension plans, the statutory guaranteed return applies to both employee and employer’s contributions.
- Guaranteed return: no longer defined by law, but recalculated each year by the ‘Financial Services and Markets Authority’ (FSMA) on the basis of a formula. The interest rate used to calculate the guaranteed return is linked to the interest rate on 10-year government loans. The guaranteed return must be at least 1.75% and may not exceed 3.75%.
Taxation and social security contributions
- The benefits in capital are taxed at a lower tariff at a rate between 10% and 20%.
- In addition, there is a withholding of health care and solidarity contributions and municipal surcharges.
Coverage
Financing
Administration
Qualifying Conditions
Benefits
Voluntary participation
- There are two different systems of pension commitments: (a) a collective scheme for (a group of) employees; (b) an individual pension commitment through a pension agreement (for personal reasons, not due to staff category; this can be in addition to an existing collective system, but may not be granted within the last 36 months before retirement).
- In case of a collective scheme: sectoral (Collective Labour Agreement, CLA) or company pension schemes (through group insurance or pension fund independent from the employer (i.e. Institutions for Occupational Retirement Provision)).
- Distinction between ‘ordinary’ and ‘social’ commitment. The latter provides, in addition to the accrual of a supplementary pension (sometimes also including death/disability pension), a so-called 'solidarity component' on the basis of which a number of additional solidarity benefits are offered (savings and further contributions are made for the supplementary pension during certain periods of inactivity, or current benefits are increased); the solidarity component must always be organised by persons other than the organiser or the sectoral organiser.1
- An employer is not obliged to offer a supplementary occupational pension to his/her employees.
- If an employer introduces a pension plan, he/she will determine which employees can benefit from the pension plan. Sometimes a pension plan applies to the entire staff, in other cases only to a certain group of employees. It is also possible that different pension plans coexist for different categories of personnel.
- If, at the level of a business sector, a sectoral plan has been introduced by means of a collective labour agreement, in principle all employers active in this business sector are obliged to participate in this sectoral plan; the employer can opt out of the so-called ‘pension part’, but not of the so-called ‘solidarity part’ (i.e. when the pension plan is also a social plan).
- It is possible that the Collective Labour Agreement (CLA) allows a company or a category of companies not to participate in the sectoral plan, but is itself responsible for building up a supplementary pension for its employees. The pension granted by the company in the event of an opting out must at least reach the level of the sectoral plan.
- The Collective Labour Agreement (CLA) may also provide that certain companies fall outside the scope of the Collective Labour Agreement.
- An employee who was already employed by that employer at the time of the introduction of the supplementary pension cannot be obliged to join the scheme, unless it is provided for by collective agreement.
General finances
- Personal pension plans based on contribution payments and capital revenues with minimum guarantee.
- A pension capital (system of capitalisation) based on the investment of deposits by the employer and/or person involved and increased by the investment returns.
Contribution payments
- Contributions paid by employer and/or employee (deducted from salary); paid at regular intervals.
- No fixed share/contribu-tion rate; amount of contribution payments can be chosen freely within predefined range.
- No minimum contribution, but contribution ceiling: annual amount is EUR 1,630 (in 2021) or 3% of the gross salary received in the previous two years (if this exceeds the annual amount).
Tax support & incentivising strategies
- Tax deductions for contributions paid by employer under certain conditions and tax exemption for employee.
- Employee contributions: tax reduction (between 30% and 40%) and insurance tax (except social pension commitments).
- Employer’s contributions: deductible as professional expenses (payment may not exceed 80% of last gross remuneration after deduction of all statutory and supplementary pensions) and number of special levies, i.e. insurance tax and special levy on social security (except for solidarity component).
- Every entity setting up a scheme is obliged to choose between concluding a group insurance or setting up a pension fund.
- Obligation to outsource to an external partner.
- This scheme is installed by an external pension institution (insurer or pension fund) or collective pension commitment (for all employees).
- This scheme is known as ‘pension scheme through pension regulations’.
- The ‘Financial Services and Market Authority’ (FSMA) monitors pension institutions' compliance with social legislation as well as the financial health and appropriate organisation of pension funds.
- The payment of the supplementary pension is linked to the statutory retirement pension (exceptions possible if provided for in pension regulations).
- Conditions are regulated in pension regulations. The law states a number of elements that must be respected in the conditions of each pension plan: e.g. no waiting period may be imposed and no discrimination may be made on the basis of, for example, gender, age, nationality and part-time employment.
Pension payments
- The payment can be made via one lump-sum capital payment or spread over time with a periodic (monthly or annual) interest rate or, in certain cases, a combination of both.
- Defined benefits or defined contributions system with two derivatives: the ‘cash-balance plan’ (between defined benefit and defined contribution system, savings are allocated on a specific day with the organiser guaranteeing a predetermined return) and the so-called ‘cafeteria plan’ (employee has freedom to decide on what the contribution can be spent (between the types of coverage as death, living, invalidity, etc.) and can choose the investment reserve while the organiser does not decide how the contribution should be spent).
- For defined benefit pension plans, there is only a statutory guaranteed return on employee contributions.
- In the case of defined contribution and cash balance type pension plans, the statutory guaranteed return applies to both employee and employer’s contributions.
- Guaranteed return: no longer defined by law, but recalculated each year by the ‘Financial Services and Markets Authority’ (FSMA) on the basis of a formula. The interest rate used to calculate the guaranteed return is linked to the interest rate on 10-year government loans. The guaranteed return must be at least 1.75% and may not exceed 3.75%.
Taxation and social security contributions
- The benefits in capital are taxed at a lower tariff at a rate between 10% and 20%.
- In addition, there is a withholding of health care and solidarity contributions and municipal surcharges.
1 Examples are (1) the beneficiary continues to accumulate the supplementary pension during certain periods of sickness, incapacity for work, etc.; (2) interest is paid in case of incapacity for work, death, sickness, etc.; (3) these pension plans come with additional tax benefits.
Legal Basis: Law of 28 April 2003 on Supplementary Pensions for Employees, the tax regime of these pensions and some supplementary social security benefits (Wet betreffende de aanvullende pensioenen en het belastingstelsel van die pensioenen en van sommige aanvullende voordelen inzake sociale zekerheid); Law of 6 December 2018 on the Voluntary Supplementary Pension for Employees and different provisions concerning supplementary pensions (Wet tot instelling van een vrij aanvullend pensioen voor de werknemers en houdende diverse bepalingen inzake aanvullende pensioenen).