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Pension reform in Belgium: background summary

The pension system, which essentially functions on a pay-as-you-go basis, was left unreformed until relatively recently, with an initial reform in 2011 having been followed by a further reform adopted in 2015. Criticised by international institutions for having an overly generous support system for early retirement, Belgium has now joined other European countries in restricting early retirement and increasing the official retirement age. It should be noted, however, that Belgium’s pension benefits are low in comparison to other countries.

Features of the Belgian pension system

  • Compulsory pension schemes operate on a pay-as-you-go basis, with three different kinds in existence: one for private sector employees, one for self-employed workers and one for civil servants.
  • A ‘sectoral pension’ scheme, which is a funded system, was set up in 2003 in order to expand the range of second-pillar pension funds and supplement the existing additional pension scheme (company scheme). The social partners, acting at sectoral level, may adopt a sectoral collective agreement making it compulsory for all relevant employers to sign up to the scheme.
  • Voluntary membership of funded personal pension plans is also encouraged, notably through tax relief on contributions up to a maximum amount (EUR 940 a year in 2015).

Pension reforms in Belgium

  • There is a consensus among Belgium’s principal economic institutes and international institutions that the Belgian pension system is financially unsustainable and that reforms are needed, particularly in terms of increasing employment among older people by gradually restricting access to early retirement (pre-pension).
  •  The ‘pre-pension’ system has often been used by management and staff representatives as an instrument of social management during restructuring. This pre-pension system has now been replaced by a system known as ‘unemployment with company supplement’).
  • Trade unions and organisations representing pensioners regularly highlight the low level of pension payments, which diminishes the purchasing power of retired people.
  • A first major reform was adopted at the end of 2011 that included gradually raising the minimum age for early retirement and the minimum contribution period, adjusting the method by which pensions are calculated, and introducing more advantageous arrangements for people working while receiving a pension. Some measures came into force on 1 January 2013, with others applied at a later point.
  • A further reform was adopted in 2015, the main effect of which was to raise the average exit age from the labour market in order to ensure the financial and social sustainability of the system.
  • This reform was set out in the Law of 10 August 2015, which raised the legal retirement age up to 66 by 2025 and to 67 by 2030.
  • It is still possible in 2016 for people with 40 years of contributions to take early retirement at the age of 62. Since 1 January 2013 the minimum early retirement age and minimum contribution period have gradually increased.
  • There is no minimum qualifying period for entitlement to pension rights. Since 1 January 2015, it has been necessary for individuals to be able to prove that they have worked 14 040 full-time equivalent days (which corresponds to 45 years of 312 FTE days) in order to receive a full pension, irrespective of the number of calendar years over which these days have been worked.
  • The pension system specifies a minimum pension amount for a full contribution record, depending on an individual’s family situation. Furthermore, as of 1 June 2016, the old-age pension for a full contribution record may not be less than EUR 17 525.38 for a household or EUR 14 024.72 for a single person.
  • Under the reform, as of 1 January 2015, employment income earned by pensioners beyond the age of 65 or after 45 years of working is no longer subject to any limit.
  • Following broad opposition from the trade union confederations, the reform now includes several transitional measures, negotiated with the social partners, benefiting, in particular, those who are close to retirement age, as well as those who, on 1 January 2015, were entitled to or would have been entitled to pre-retirement leave.
  • As an extension to the 2015 pension reform, the Government now intends to encourage employees, through the tax system, to sign up to personal pension plans in order to supplement the statutory pension.