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.