The state pension
Calculating your entitlement to the state pension in Belgium is not straightforward and is based on a number of factors, including years of contribution and salary level. The maximum is currently between (approximately) €2,373 for singles and €2,966 for families. Expats are unlikely to receive this full amount from the Belgian Pension office, though state pension rights accrued elsewhere could offset the shortfall. Even those who spend their entire career in Belgium are unlikely to be comfortable getting by on an income that’s limited to state entitlements.
Supplementary occupation (company) pension
This encompasses all the supplementary pension schemes linked to your place of work. There are two types of pension for employees:
Defined benefit/final salary, where the workplace pension at retirement is guaranteed and is based on salary and years of service. There is also often a spouse’s pension attached in case of death. An employee spending their entire career with the same employer used to be able expect to retire on two-thirds to half of their final salary.
Some institutions in Brussels still provide these generous schemes, but this is rare for expats in the private sector who not only move from job to job but by definition from country to country. In addition to this, funding rules around pensions, which receive generous tax breaks, have changed in many countries.
Defined contribution/money purchase, where the final pension paid depends on the value of money put in and growth on that fund over the duration of the pension saving. These are either pension funds or more often group insurances, which are more common in Belgium.
There are different provisions for self-employed people who have access to money purchase schemes. Self-employed individuals can also use pension savings to reduce their social contributions, as can supporting spouses and employees. Even two-thirds of one’s final salary may not be sufficient to continue one’s standard of living.
Personal pension saving with a tax break
The government encourages tax-deductible pension savings and long-term savings. These combined payments are limited to about €3,000 per person a year and the investments are mainly managed by either your bank or a life insurance company. By regularly depositing money in a pension savings fund or life insurance, you are entitled to tax relief on your professional salary of (most often) up to 30%.
Voluntary personal saving with no tax break
These are restricted, non-tax-deductible savings. Although there are no special tax breaks on this kind of savings, there are some advantages. You can invest in such a way that savings grow tax-free and the entire fund can be taken out as a lump sum at any time. Investments are not restricted, so you are free to invest in the assets of your choice. In the current climate, it makes sense to accumulate at least part of your retirement funds in products that are not locked up until retirement. Pillars one, two and three are all vulnerable to direct attack through increased taxation or indirect attack through inflation. If you want to make sure about a lifelong income, make online calculations or talk to an advisor.
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