Belgium’s new pensions and environment minister Bruno Tobback has his work cut out.
The ever more important and contentious portfolio of pensions offers challenges galore. But to make his mark Tobback must, at the tender age of 35, prove himself against the backdrop of his influential predecessor Frank Vandenbroucke, architect of the far-reaching Vandenbroucke Law, and accusations of nepotism. His father is fellow socialist party member, former minister and now senator Louis Tobback.
“I think he has made progress in his political career much more quickly than he would have done if he had another name,” says Joseph Vuchelen, professor of economics at the Free University of Brussels. “This is a structural illness of the Belgian political system. In some ways it is like a monarchy.”
But so early on in Tobback junior’s term of office - he was appointed last summer - it is perhaps a little early to judge.
Until that time work and pensions was a single portfolio, but the size of the two areas made the government decide to create two separate posts.
It is undeniable that Tobback, who entered politics from the legal profession, has a tough act to follow. His predecessor Frank Vandenbroucke was architect of the Vandenbroucke Law which in the space of little more than a year has brought second pillar pension provision to the masses via a system of industry-wide pension schemes.
Vandenbroucke vacated the position when he moved to become deputy prime minister in the regional Flemish parliament. “The regional parliament needed someone with a strong profile,” Tobback says. Tobback moved from the regional parliament.
In the Belgian system of national and regional parliaments where the Flemish and French-speaking contingents are keen to assert their respective identities, a move from one to the other is not necessarily considered a promotion or demotion.
“Minister Tobback is really the heir to his predecessor,” says Hugo Clemeur, secretary general of the Belgian Association of Pension Institutions (BVPI). “That is not so simple from a political point of view, not least because they belong to the same party.”
He adds: “I was disappointed when Vandenbroucke left because we had a good working relationship. But Tobback is very open – he has some outspoken opinions and is willing to listen.”
Tobback’s youthful looks make him appear even younger than his 35 years. With his crew cut and grey polo-neck sweater, Tobback appears relaxed and unfazed by the challenges he faces.
He is clear about the overriding issue which is, as elsewhere, cost. “Our main problem is the affordability and sustainability of the state system.” He adds: “We don’t have a particularly generous state pension in Belgium. It is both affordable and sustainable for the next couple of decades as long as we have a balanced budget. What we have to do is top up pension provision which is why we are trying to develop a much more widely available system of second pillar pensions.”
This is the system brought in at the beginning of last year by the Vandenbroucke Law. To date progress has been good, but Tobback stresses that there is still much to be done. “Today we cover about 1.3m,” Tobback notes. “The collective wage negotiations could add up to 700,000, but I don’t think we will achieve that figure; not all the sectors will reach agreement this year.”
Tobback is keen to highlight the importance of quality long-term provision. Pensions are increased in line with the rate of inflation rather than increases in wages. An additional increase of 2% has been granted to those who retired in 1997. “This year we are going to do this for people who retired in 1998 and 1999 and next year we will give the increase to those who retired in 2000 and 2001. Otherwise there will be real erosion of the standard of living.”
Another boost to long-term provision came last year when legislation was passed to give equal fiscal treatment to lump sums and regular pension payments. Until then the fiscal system favoured the lump-sum.
The aim of the change is to encourage people to draw down less on retirement and keep more as regular retirement income. But as Tobback notes: “The old system got people into the habit of taking lump sums; before the change 80% took only or mainly the lump sum.”
He adds: “If you take the lump sum the risk is yours; if you take it as monthly payments the risk is with the insurance company. So we are trying to inform people that it might be more interesting to choose the monthly payments.”
Information is an issue that is close to Tobback’s heart. “The problem is that most people in Belgium are not sufficiently well informed so as to be able to make an educated choice,” he says.
Tobback hopes to introduce a system whereby everyone at the age of 55 will receive a statement which will show how much they would receive by way of pension if they retired at that moment, and how much they would receive if they were to work for another year, two years, three years or more. “This is very informative - and formative - and may be a way of encouraging people to work longer,” he says. “We will probably do this next year.”
In time he would like to extend the system of pension statements to all working people; he notes that there are still great misconceptions across the age spectrum. “On the one hand young people of 25 to 35 are not interested in pensions,” he says. “On the other, older people overestimate what they will receive by way of pension and often have a disappointing experience once they get to retirement age.”
The system of information will cover both state and occupational pension entitlements. “We will start with state pension because we have that information already,” says Tobback.
With the aim of improving the quality of information the ministry launched a new free dedicated pensions hotline in January. “Everyone can call the number for general information,” says Tobback, “even housewives, if they’re interested. They will be connected with a call centre with 24 new staff speaking both Flemish and French.”
He adds: “Pensioners will receive a four-digit pin number which will connect them directly with the civil servant dealing with their pension file.”
But there are other technical elements that are causing concern.
Clemeur at the BVPI has an issue with what he describes as the minister’s “outspoken opinions on discrimination laws”.
He notes: “The law as it stands goes too far because it says you cannot discriminate on age,” he says. “But if you cannot discriminate on age - which I agree with in principle - you cannot use a mortality table.
“The law is too general so you end up questioning nearly everything in a pension plan. So we would really like to have a clarification. The minister says that he doesn’t see the problem but in fact we do have a problem with anti-discrimination laws in Belgium. This is obvious.”
Clemeur explains that the association is also in the process of trying to convince the minister that the minimum interest rate should be reviewed. “At the beginning there was some reluctance to go into the subject but he is more open to it today than he was a couple of months ago,” he says.
Tobback’s intentions are good and the start has been promising; January’s launch of the freephone number will have gone down well. Now he has to emerge from the double shadow of his father and predecessor and establish himself as a force to be reckoned with in Belgian politics.