Belgian pension funds have bounced back from last year’s losses with an average return of 4.5% for the first six months of 2023, according to the industry association PensioPlus.
This compares with an average return for the first half of 2022 of -12.9%, and a return for calendar 2022 of -14.9%.
PensioPlus attributed the improved returns to an investment policy focused on long-term investments in the real economy.
“The industry’s average funding ratio has made a steady recovery during the first half of this year,” the association said. “This evolution is mainly due to the positive returns and the recovery measures taken by a significant number of pension funds in order to restore the safety buffers, following the extremely challenging financial market conditions in 2022.”
It pointed out that long-term returns are also positive, generating an average nominal return of 6.1% a year over a period of almost 40 years, or 3.9% a year in real terms.
It concluded that the sector therefore remains well-funded, and sufficiently armed against future fluctuations on financial markets.
Ann Verlinden, chief executive officer of PensioPlus, said: “These figures clearly show that pension funds offer solid long-term protection of purchasing power against inflation.”
She said that €100 invested in 1985 was now – after applying the sector’s historical average returns – worth €464 in real terms, corresponding to €951 in nominal terms.
“In real terms, people recuperate almost five times their investment, and almost 10 times in nominal terms,” she added.
Meanwhile, at the end of December 2022, Belgian pension funds had allocated an average 48% of their assets to fixed income and 36% to equities, with 9% in alternatives, 3% in real estate and 4% in cash.
However, PensioPlus acknowledged that the statutory pension is under pressure, given the demographic move towards a situation where fewer and fewer active people will be left to pay for state pension entitlements, while financing costs will increase because of rising life expectancy.
In view of the country’s upcoming federal elections, scheduled for June 2024, the Belgian pensions sector has put forward a memorandum of seven specific proposals concentrating on three themes: increased coverage of the second pillar, both in numbers of members and also level of contributions; increasing public confidence in the pension system; and strengthening the system.
The proposals are:
- to work towards a sufficiently adequate supplementary pension for all;
- ensure legal certainty and stability, in relation to tax-related issues, among others;
- be transparent;
- simplify and clarify, where possible;
- strengthen the social role within a workable prudential framework;
- strengthen sustainable investment; and
- co-operate more at European level.
PensioPlus has shared the memorandum with all relevant stakeholders.
A spokesman told IPE: “We have had in-person meetings with the federal political parties on this subject in order to ensure that supplementary pensions are top-of-the-mind when drafting their respective programmes in preparation for the elections.”