A “drastic” simplification of the investment requirements for third pillar pension products in Belgium’s tax law could provide a much-needed boost to this retirement savings channel, according to the country’s regulator.
The recommendation is one of a few possible reform pathways outlined by the FSMA this week in response to several political requests for its opinion. The chair of the FSMA, Jean-Paul Servais, has suggested creating a taskforce with other stakeholders to continue discussions about the shape of a potential reform.
The topic has arisen in no small part because of the Savings and Investment Union (SIU) agenda and its goal to mobilise more investment in the EU.
According to the FSMA, Belgian third-pillar pension saving funds invest 88% of their assets in Europe and €2.1bn in European small caps, of which €357m is in domestic shares.
Total assets in pension savings products reached €42bn at the end of 2024, but the FSMA said the growth has mainly been driven by developments in the financial markets and a surplus of contributions.
“In order to keep pension savings relevant, in light of evolving expectations and retail investor behaviour, the current regime needs to be modernised,” it said.
A “back-to-the-roots” simplification would be one way of achieving this, according to the FSMA. Third pillar pension products in Belgium come with tax advantages, but the list of requirements they have to meet to obtain these has ballooned since the savings channel was launched 40 years ago.
“The current investment requirements bear no resemblance, in terms of complexity, to the legislator’s original intent in 1986,” said the FSMA in a statement.
“At the time, the aim was to stimulate risk capital through pension savings, and the investment requirements were simple.”
Simplification could also encourage greater diversity within the range of products offered and, for example, make passive investing possible, the supervisory authority argued.
Another reform option, according to the FSMA, would be to eliminate a number of barriers that have made switching between retirement savings products difficult.
FSMA chair Servais has floated the example of Sweden’s investment savings account (ISK) as something that Belgium may want to consider.
