Belgium: Portability pain
Belgium has been accused of ‘gold plating’ the EU portability directive
• Belgium is in the process of incorporating the IORP II directive into national law
• Parliament has approved a law that amends Belgium’s workplace pensions act as it came into conflict with the EU portability directive of 2014
• In amending the current legislation, Belgium has gone beyond the requirements of the EU portability directive
• In July the cabinet approved draft legislation allowing employees to contribute to a private supplementary pension, in addition to any plan provided by the employer
Like other EU member states, Belgium has until January 2019 to incorporate the new EU pension fund directive – IORP II – into national law. It has been working on this and the pensions minister, Daniel Bacqueliane, is due to present a draft bill to the cabinet later this year.
A law transposing another piece of EU legislation was passed before the summer. In June, parliament approved a law amending Belgium’s workplace pensions act (WAP in Dutch, LPC in French), which was in conflict with the EU portability directive of 2014.
Under the EU directive there is a limit of three years on the combined length of any minimum vesting period and waiting period before occupational pension rights vest. The minimum age for when an employee can join the pension plan is not allowed to be higher than 21 years.
In Belgium, however, occupational pension schemes could stipulate that an employee only be allowed to join their employer’s pension plan from the age of 25.
It was also legal for schemes to specify that pension entitlements based on employer contributions would vest only after one year of affiliation to the plan. Pension rights accrued on the basis of personal contributions are always immediately acquired.
In amending the current legislation, however, Belgium went beyond the requirements of the EU portability directive by introducing immediate vesting of rights and banning the use of affiliation ages.
The Belgian pensions industry is unhappy about this move. However, the employer organisation VBO/FEB said the government had ‘gold plated’ the EU legislation and warned against the administrative and cost implications.
Lawyers have said that the law could lead to an additional administrative burden on pension funds and insurance companies because the immediate vesting of pension entitlements could mean small amounts of assets will need managing for many years. One law firm said that for many employers the price for supplementary pension schemes could increase.
A study by the Catholic University of Leuven indicated that the new law would increase the potential number of employees with dormant pension rights in industry-wide schemes by 55,000 a year.
To reduce administrative costs for pension providers, the incoming law states that it is no longer obligatory to offer the option to transfer vested reserves to another pension provider for amounts below €150.
The use of affiliation ages or vesting periods will be banned from January 2019.
The government has also been busy attending to home-grown pension initiatives. In July the cabinet approved draft legislation that would allow employees to contribute to a private supplementary pension on top of any plan provided by their employer.
The employee would be free to choose the pension provider and pension plan.
Under the system set out in the draft bill, an employee could decide to contribute to a private supplementary pension up to 3% of a reference wage based on their salary, minus any contributions to an existing occupational pension plan.
The employee would decide the contribution level and the amount would be deducted by the employer from the employee’s net salary. At the time of writing the draft bill was with the Belgian supreme administrative court for it to provide an opinion.
Earlier in the year the Belgian parliament approved a law allowing self-employed individuals to build up a tax-friendly supplementary pension within the second pillar.
The arrangement is called Convention de Pension pour Travailleur Indépendant (CPTI) in French or Pensioenovereenkomst voor Zelfstandigen (POZ) in Dutch.
Under the old system, self-employed individuals working outside or without a company – such as traders, craftsmen or notaries – had few means to meaningfully supplement their statutory pension. Self-employed company directors had more options.
With the new law, self-employed individuals can conclude a POZ/CPTI contract, benefiting from a tax reduction of 30% on contributions – as long as statutory and supplementary pensions do not exceed 80% of the previous year’s gross salary – the so-called 80% rule.
Contribution levels can be freely chosen, and there is favourable taxation upon pay-out of capital at retirement.
The law is the result of a joint initiative between the minister for the self-employed and small businesses, the pensions minister, and the finance minister.
Another development is the government’s proposal to change the law on pensions for workers with physical injuries – although this only affects civil servants.
A draft bill would prohibit medical professionals from deciding that an individual who has used up all sick leave must retire. This could be reviewed after two years. The intention of the law is to give people a better chance of returning to work.
Before the summer recess the cabinet approved a draft law on pensions for workers in arduous occupations. The aim is to allow these individuals to retire early or to receive a higher pension if they decide to continue working and in so doing compensate them for planned increases in the pension age.
The retirement age in Belgium is 65 but this will increase to 66 in 2025 and 67 in 2030.
The draft bill was approved in a second reading, having been amended to take account of an agreement reached with some trade unions on what public-sector occupations should be deemed arduous.
At the time of writing, employer organisations and trade unions had yet to agree on the criteria that should apply when drawing up a list of demanding occupations in the private sector.
Amonis handles pension surge in 50th year
Amonis, one of Belgium’s largest occupational pension funds, last year dealt with a massive increase in the number of retirement pensions being taken.
Overall, 968 pensions were taken in 2017, up 86.5% from the year before, it said. The amount of capital paid in retirement and survivor pensions increased 78.7%, up from €54m in 2016 to €97m last year.
The increase in pensions being taken was driven by “a catch-up movement” on behalf of members who had taken their statutory pension in 2016 but not their Amonis pension.
Under 2015 legislation, second-pillar pensions have to be taken at the same time as the state pension.
The €1.9bn fund for the healthcare sector said it expected fewer pensions to be taken from this year onwards.
The pension fund’s investments gained 3.64% in 2017, up slightly on the 3.55% return the year before. Its growth portfolio gained 9.74%, while the liability-driven investment (LDI) portfolio made a loss of 0.01%. Amonis said this was “reasonable” given meagre returns on government bonds.
As at the end of December, 65% of Amonis’ portfolio was invested in bonds, 22% in equities, 4% in real estate equity, 1% in cash, and the rest in other assets.
At 8.55% of turnover, operating costs were a bit higher than in 2016, in part because of the impact of legislative changes.
Amonis hopes to sign up self-employed individuals to a new second-pillar top-up savings scheme it is offering on the back of the new law introducing these arrangements (CPTI/POZ).
The pension fund, which celebrated its 50th year anniversary last year, also has its eye on the so-called ‘double cohort’ of medical students that graduate this year. In 2012 the length of foundation studies for a medical degree was cut from seven to six years, so this year sees two different classes complete their studies.