BELGIUM – The Organisation for Economic Cooperation and Development (OECD) says Belgium needs to do more to reduce incentives for early retirement.

"More will need to be done to reduce incentives for early retirement and increase demand for older workers if the objective of doubling the employment rate for the older working age population -- which would also boost Belgium's currently low overall employment rate -- is to be met," the OECD says in a report on Belgium.

"In particular, all public subsidies for early retirement should be removed, notably by phasing out financing for pre-pensions, abolishing the status of "older unemployed" and scrapping seniority-based unemployment benefit premiums."

But it acknowledges that Belgium has made efforts to "encourage occupational pensions and increase effective retirement ages".

Belgium must rely on the "dynamics" of the rules already in place, the OECD says. "A major element in the approach to ensuring fiscal sustainability in the face of population ageing is to reduce the public pension benefit ratio by relying on the dynamics of the rules in place."

The country’s pension system is designed so that falling benefit ratios affect above average income earners, the OECD notes.

It says Belgian households prefer to hold a "significant proportion" of their financial assets in lightly taxed instruments or those "that can escape detection by the fiscal authorities". It would be preferable to cut tax incentives for second pillar savings while making the regulatory framework for these instruments more attractive, for example by improving the portability of second-pillar pensions, the OECD says.

The OECD concludes: "Provided that future governments stay the course of fiscal consolidation and structural reform, it will be possible to reduce the tax burden further, improve output and employment performance, and maintain a sustainable fiscal policy despite the budget costs of population ageing."

In December the European Commission said of Belgium: "Further adaptations to the pension system are needed to respond in particular to the needs of atypical workers and the self-employed."