Belgium’s pension fund association has added its voice to concerns over a government proposal for personal workplace pensions, calling for the “specificity” of the different pension pillars to be respected.

The government last month announced that, as of 2018, all employees should be able to save for a second-pillar pension even if their employer does not offer this opportunity.

Under the government proposal, an individual could, on his or her own initiative, decide to contribute part of his/her salary to a pension, and the tax benefits would be the same as those applicable to contributions into pension schemes set up by employers.

PensioPlus, the country’s pension fund association, said it was worried about the possible impact on the second pillar.

Its reaction to the government’s ideas, made public this week, comes after the academic pensions council earlier this month raised the alarm over the reform plan, saying it represented a “dangerous” move towards “individualisation”.

Pensions minister Daniel Bacquelaine in turn responded by saying he was “astonished” the council was “contesting the right of an employee to freely build a complementary pension in the second pillar”.

Bacquelaine said he nonetheless intended to modify this right so it could better address “the reality” as concerns complementary pensions in Belgium, and that the details were still to be developed.

‘Jungle’ fears

PensioPlus said the minister should submit his proposal to the national labour council for its opinion if he intends to follow through with his idea to allow workplace personal pensions.

“PensioPlus considers that a ‘voluntary’ individual pension for an employee does not fall under the remit of the second pillar and reminds the pensions minister that the ‘specificity’ of each pension pillar needs to be respected,” it said in a statement.

Philip Neyt

Personal pensions need to be addressed through supplementary pensions in the third pillar, which is the general definition applied by the OECD, it added.

Philip Neyt (pictured), president of PensioPlus, said: “We should first do the groundwork and learn from the experiences with these kinds of individual pension accounts, like in Chile, Mexico and Eastern Europe, and [that] now are pushed back under a lot of pressure due to high costs, disinformation, financial illiteracy, etc.”

He told IPE the experience of auto-enrolment in the UK would be worth studying given the apparent success of it so far, including for potential lessons about how to get the many small companies in Belgium “on board” in the second pillar.

The government’s proposal is unnecessary and potentially damaging and ineffective, according to Neyt.

He said there were already “fairly extensive measures” allowing individuals to save for retirement on top of the second pillar, with tax benefits, and that there could be scope for improving pension coverage within the existing system by strengthening the second and/or third pillars.

“The minister should first examine the ‘blind spots’ in the second pillar to take adequate measures,” said Neyt.

He said it could be damaging in the sense that it could “cannibalise” the second pillar by undermining the motivation for employers to offer workplace schemes if there were alternatives that transferred the risk to the individual and were not subject to prudential regulations or social and labour laws governing second-pillar pensions.

“I fear costs especially,” he said, “even more in a low-yield environment. I would not want, after a couple of years, people to become dissatisfied because that would have a collateral effect on all the pillars.” 

The government’s proposal could amount to the introduction of a pure investment product rather than a pension product, with a host of inter-related associated issues such as consumer protection, costs and financial education, according to Neyt.

“We don’t want to create a jungle in the pension world in Belgium,” he said.