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Belgium: Cross-pillar reform target

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The government has been acting on reform recommendations from the Pension Reform Commission

Key points

• The pensions minister wants to reinforce the link between work and pensions.
• The government has approved a bill to develop second-pillar provision for the public sector.
• Talks are ongoing about a proposal for individual voluntary workplace pensions.

The Belgian government has a long-term ambition to turn the country’s state pension system into a points system. Under this arrangement, employees are allocated points for pension contributions, which are later converted into a pension amount. The pensions minister, Daniel Bacquelaine, has said he wants to have the legal basis of the points system defined before the end of the current legislature in 2019, so that the new system can enter into force in 2025.

This would be five years earlier than envisaged by the government’s initial political programme.

Establishing a points system in the first pillar was one of the recommendations of the Pension Reform Commission 2020-40, a panel of experts appointed in 2013 by the then government.

According to Bacquelaine, establishing a points system should lead to greater convergence between the different state pension systems – for civil servants, the self-employed and the private sector.

For now, the government has published several draft bills that modify elements of the current state pension system. A key motivation for Bacquelaine is to strengthen the link between a pension and time spent in the workforce.

In July, the cabinet approved a draft law that abolishes the limit on the number of working years that is taken into account in calculating pensions.

belgian country facts

The intention is to allow people who work longer than the officially recognised ‘full career’ of 45 years to accumulate the right to additional pension benefits.

It is also intended to introduce freedom with respect to retirement age, although this would be accompanied by actuarial adjustments. These would be negative for those who opt for early retirement, and positive for those who have a longer career.

As part of the government’s ambition to harmonise the different first-pillar pension systems, and strengthen the link between pensions and work, it also wants to abolish the recognition of years spent studying for a civil servant’s pensionable service.

It has tabled legislation that allows individuals to pay for years spent studying to count towards their pensionable service. The idea is that this would give the same pension amount regardless of whether they are a civil servant, self-employed, or salaried worker.

Until now, civil servants’ study years have qualified automatically, without a penalty, towards the calculation of their pension.

top 10 belgian pension funds

The government also wants to allow partial pensions, whereby an employee could take part of his pension while continuing to work and accrue additional pension entitlements. The idea is for this to be incorporated as part of the points system, and for the associated rules to be adopted in time for them to take effect in January 2019.

The government is also seeking to expand supplementary pension saving, including by developing second-pillar pensions for public sector employees (as opposed to civil servants).

A draft bill on mixed pensions approved by the cabinet in July includes a chapter amending the regulation of supplementary pensions to encourage Belgian public sector employers to develop a supplementary pension scheme for contractual staff.

Bacquelaine has said the federal government will lead by example by introducing a supplementary pension for its contractual staff this year, and that it has allocated a budget of €32m for this purpose.

The draft law also foresees financial incentives for local authorities to set up or develop a second pension pillar for contract staff.

The draft bill also anticipates that a period of employment as a contract-based employee will not be included in the calculation of a public sector pension. This means that a civil servant who was previously contractually employed will be entitled to a contractual employee’s pension for the relevant period worked, and a public sector pension for the years as a civil servant.

According to a summer update on its programme, the government wants the public sector to prioritise hiring contractual employees, rather than appointing civil servants, with the exception of some functions.

The Belgian government also wants to introduce a second pillar for self-employed workers who operate as an individual rather than a service company. The fiscal rules should correspond to the framework already in place for the self-employed who are registered as a legal entity.

In its July programme update, the government also reiterated its ambition to develop voluntary complementary pensions for salaried employees.

In October 2016 it had unveiled a proposal for personal workplace pensions according to which, as of 2018, all employees would be able to save for an additional pension via contributions that would be withheld from their salary by the employer.

Currently, salaried employees can only save for an occupational pension if their employer has decided to operate a pension plan, and in some cases contribution rates are quite low. The novelty of the government’s proposal is that the initiative to build an occupational pension would rest with the employee.

The Belgian academic pensions council, which is the successor to the Pension Reform Commission and provides advice on government pension proposals, and the occupational pension fund association, raised concerns about the proposal last November.

PensioPlus, the industry association, said it did not consider that a voluntary individual pension for an employee should fall under the remit of the second pillar and urged the pensions minister to respect the “specificity” of each pension pillar.

Responding to the academic council’s criticism at the time, Bacquelaine had indicated the government would make some changes.

IPE understands that talks are going on about the proposal, but that no final decisions have been made.

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