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9 November 2016

Pensions reform in Belgium: Experts fear deepening inequality

The Belgian Government is paving the way for the next phase in its reform of the pension system. Minister for Pensions and French-speaking Liberal Daniel Bacquelaine is seeking to encourage employees to take out individual pension savings plans supplementary to the statutory pension. Experts believe the planned reform could exacerbate social inequality.

The financing of pensions in Belgium is based on a three-pillar system: The first pillar — the statutory pension — is financed through contributions paid by employees and self-employed persons; the second pillar comprises premiums paid by employers and employees alike, and, lastly, the third pillar is based exclusively on workers’ personal savings plans earmarked for supplementing their retirement income.

The forthcoming reform will see a widening of the second pillar to include individual pension savings plans taken out with financial institutions. Minister Bacquelaine’s main concern is to allow access to the second pillar for those employees whose employers do not offer them the option to build up a supplementary collective pension. 40% of employees, the minister claims, fall into that category.

Experts consider that the proposed reform poses risks to workers. Frank Vandenbroucke, the former Minister for Social Affairs who now chairs the Academic Council on pensions, told the press, ‘It will be a case of “every man for himself” under this pension system.’ The Academic Council provides advice on government proposals concerning pensions.

Together with nine of his colleagues, Professor Vandenbroucke made a statement, published on Friday 4 November in three Belgian daily newspapers, warning that ‘Promoting individual investments should not be part of the pension strategy. We will begin to unravel the social contract that we specifically sought to strengthen and increase individual risks and social inequalities.’

These experts, most of whom are university lecturers, claim that opening up the second pillar to individual initiative will incite employers to abandon the path of supplementary collective pension schemes.

Furthermore, the new system would not be without risk for employees. The traditional second pillar is, after all, based on collective bargaining: the amounts to be paid by employees, on the one hand, and employers, on the other, are established in a collective labour agreement under which employees are guaranteed a return. The reform would allow those employees to determine independently the amount to be deducted from their salary by the employer for payment into their supplementary pension, but they would forfeit their guarantee of a return.

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