Retirement in Belgium: The pension system explained

STATE PENSION

The amount you will receive from the Belgian state will depend on a number of factors, including whether you are/have been employed or self-employed, the number of years of contributions, your salary level and whether you have dependents.

In the past, knowing your future state pension income was only possible from five years before retirement; now, using your ID card you can find out what you can expect based on your current contributions at mypension.be. Complementary pension savings are recommended, via your employer, personally or a combination.

Since 1 January 2019, the maximum annual pension amount is €2,470.38 for a single person and €3,087.97 for someone with dependents, after at least 45 years of maximum contributions. The retirement age will be 66 from 2025 and 67 from 2030.

OCCUPATIONAL PENSION

These come in a number of shapes and sizes, but the main types are:

Defined benefit, also known as final salary, where the pension paid at retirement is based on a salary factor (it could be final salary or average salary over the final three years) and the number of years worked for the employer. The benefit is usually paid as income only with limited ability to access a lump sum. It is most common in the EU institutions and becoming a rarity in the private sector. Other benefits such as spouse’s pension, orphan’s pension and guaranteed death benefits can also be attached to these schemes.

Defined contribution, also known as money purchase, where the final pension is based on the value of a fund at the point of retirement and determined by the level of contribution. There are pension funds in Belgium, but these are usually insurance-based group schemes. There are subtle differences across the schemes, the main ones being between the self-employed and those who are employed.

Historically for the self-employed, there has been a big difference in what could be contributed into a pension depending on whether you used a company structure or worked as a sole trader. Th is changed in 2018 and there are significant new opportunities for the latter, whereby those working with a company structure can use pension contributions to reduce tax and social security contributions.

Contributions are limited based on family situation combined with a relatively complex actuarial formula. Life insurance and income protection can also be added to these schemes with the costs ranging widely.

TAX-DEDUCTIBLE PERSONAL CONTRIBUTIONS

While there is some scope to make long-term pension savings taxdeductible, these are limited to about €3,000 a year and if you have a mortgage, which uses up some of the tax breaks, it can be less than €1,000 a year. You pay from net income and claim a tax credit of up to 30% the following year, which can make sense financially for long-term expats. Schemes are offered by insurance companies and banks, but vary widely. As well as the time you think you might spend in Belgium – which may not match reality – the cost and your risk profile can help guide you. There is tax (currently 8%) to be paid on maturity.

PERSONAL SAVINGS

Investment and savings plans come in many shapes and sizes. The three main factors are your personal risk level, cost and tax. As there is no tax deduction, these schemes are more flexible and therefore potentially portable. You can invest directly into funds via the bank and pay some stock exchange tax as well, possibly as dividend or capitalisation tax, or via an insurance company whereby you pay an insurance premium tax at entry but, depending on the type of scheme and time invested, no tax at the time of surrender of withdrawal. If you leave Belgium you need to know how these funds might be taxed in your new country of residence.