The Belgian government has finally reached agreement on a framework for occupational sector-wide and company pension schemes after last minute wrangling over guarantee rate levels for the hybrid DB/DC plans.

In the Council of Ministers on Friday (Jan 26), minister of social affairs and pensions Frank Vandenbroucke announced that a compromise had been reached.
The guarantee will now be tagged to inflation for the first five years of contributions before switching to a 3.25% long-term rate.

Henk Becquaert, cabinet adviser to Vandenbroucke, comments:
“ I think it is a good compromise. It was difficult at the end but we now have a decision by the ministers and we can move forward.”

The new law seeks to plug a gap in Belgium’s 1995 social security law (Loi Colla), which overlooked industry-wide pension arrangements.
Only one in three workers in Belgium currently belong to an occupational pension plan.
Now all workers within an industry sector must be able to contribute a minimum tariff – to be decided upon by royal decree - to belong to the ‘solidarity’ portion of the fund.
On top of that they will be able to add contributions to a maximum of 5%.

Giving its notion of the second pillar, the government notes that this is a collective engagement for sectors and corporations, but one that can include some individual arrangements for workers within companies.

Scheme members will be also be fiscally incentivised to buy an annuity upon retirement.

In the event of pension transfers, if the length of affiliation to a plan is at least five years then the 3.25% is guaranteed less 0.5%.

Under strict conditions a preliminary duration of 42 months of affiliation is required for an employee who leaves an employer and funds a pension individually.
If this is met then the subsequent savings are not considered as third pillar assets but continue to enjoy the same tax advantages as the second pillar.

The law says sector-wide plans must apply to all workers within a sector and be organised and managed according to paritary principles.
Charges should also be limited to a maximum of 5% of premiums.