
Belgian government agrees on pension reform
Increasing employment of older people
VS – 07/2023
The
Belgian government agreed on a pension reform on 10 July. This means that the
agreement reached a year ago [see July 2022 news] will be corrected and supplemented. Reform
objectives continue to increase the employment of older people as well as
increasing women's pension entitlements. Another focal point is the financial
sustainability of the pension system. The reform measures are intended to
reduce the projected increase in pension expenditure as a share of gross
domestic product (GDP) by 0.5 percentage points by 2070. The Belgian government
is now complying with demands from the EC and paving the way for funds to be
released from the EU's reconstruction fund.
New pension bonus
A
pension bonus is also at the centre of the reform. The pension bonus is aimed
at long-term insured persons who fulfil the conditions for early retirement
without any deductions.
The
Michel government abolished this pension bonus in 2015. The associated
expectations of an increase in the actual retirement age had not been
fulfilled. They now want to do things differently with the new pension bonus. A
one-time payout can now also be chosen in addition to a supplement to the
monthly pension and if the employment phase is extended by a maximum of three years,
then this one-time payout will amount to 22,645 euros (net). Insured persons
will only can receive the pension bonus if they retire after 45 years of
contributions. No distinction will be made as to whether they are employees,
civil servants or self-employed.
Windfall
effects will be avoided as far as possible by limiting the pension bonus to
those insured for many years. This has contributed significantly to the
annulment of the old bonus scheme. At that time it was primarily high-earning
academics who benefited from the regulation, although they would have worked
beyond the standard retirement age even without a bonus.
Minimum pension: latest increase will be limited
Another
component of the pension reform relates to the minimum pension. The government
had committed to gradually raising the minimum pension to 1,500 euros net
within the four years between 2020 and 2024. The minimum pension has already
exceeded this target as a result of the particularly high inflation seen in
2022. After the third increase of 2.6 per cent in January 2023, the minimum
pension will be 1,549 euros net per month for a single person and 2,045 euros
for couple households. The fourth and final increase, scheduled for the 1
January 2024, will be adjusted in line with price developments, but it will not
exceed 1,622 euros.
Minimum pension: women's access is improved
The
conditions for receiving the minimum pension were also tightened as part of the
July 2022 pension reforms. The entitlement requires 30 qualifying years and
5,000 effective working days. This corresponds to 20 years at 80 per cent
part-time or 16 years full-time.
In order
to mitigate the impact of this reform on women, whose careers are generally
shorter and more fragmented and who are therefore less likely to meet the
effective working days condition, maternity, child-rearing and care periods
will also be counted as effective working hours.
Cuts in civil servants' pensions
Civil
servants' pensions are adjusted in line with the salary development of active
civil servants. Therefore these adjustments usually exceed those of dependent
employees and self-employed people. Their pensions are indexed according to the
price development. In the future, the adjustment of civil servants' pensions
will increase by a maximum of 0.3 per cent more than the inflation rate.
At 2.4
billion euros per year this limiting of the adjustment will contribute significantly
to the reform package's savings of 3 billion euros per year.
Taxation of high supplementary pensions
The tax
rate on supplementary pensions of 30,000 euros per month or more will be
increased from three per cent to six per cent. This is expected to generate
additional revenue of 600 million euros per year, but only after 1 January
2028. The Belgian government is accommodating the social partners, who called
for the status quo to be maintained back in the spring. About 2,000
supplementary pensions recipients will be affected by the increased taxation.
How it works:
The
pension reform will be discussed and passed in the parliamentary procedure
after the summer break. The pension reform will come into force on 1 January
2024.