Belgian Pension System for Expats

Belgian Pension System for Expats

If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).

This article is here for general informational purposes only, and the facts might have changed since we wrote it.

Introduction

It is critical to your financial security in retirement to have a solid grasp of the Belgian pension system, as an expat living and working in Belgium. 

A state or public pension, occupational pensions, and private pensions are the three components that make up the Belgian pension system. Residents who are above the age of 65 have access to pensions, and they must have paid into the system for at least 42 years. 

The number of those eligible to receive pensions is expected to grow as the government works to reduce the ever-increasing cost of providing pensions to an aging society. 

The fact that Belgium’s population is getting older is one of the country’s most pressing challenges; as a consequence, people will live in retirement for longer periods of time, which will extend the government’s financial obligations.

That’s why the government of Belgium intends to elevate the retirement age come 2025 to 66 and to 67 in 2030 for both men and women. 

Belgian Pension System retirement age revision
Demonstrations against increasing the retirement age held by Belgian military trade unions in 2016. Image by ConcettoB@ndinelli

State or Public Pensions Under the Belgian Pension System

In Belgium, those who are employed, those who are self-employed, and those who work for the government are all required to participate in a mandatory pension program. The amount contributed by employees is 7.5 percent, while the amount contributed by employers is 8.86 percent. Although benefits are tied to a recipient’s income level, the Belgian government does guarantee a base level of support for senior citizens.

Earnings received in the past, the recipient’s current income level, and marital status all factor into the pension income. For persons who are single, the maximum pension payout is equivalent to 60 percent of their pensionable income, whereas individuals who are married receive 75 percent of this amount.

 Every person over the age of 65 whose total income (from pensions and other sources) falls below a specific threshold is eligible for a minimum guaranteed income for elderly persons. This income is available to those who qualify.

At the age of 65, an individual must have a contribution record of at least 45 years in order to be eligible for a full pension. This contribution record can include time spent collecting unemployment or disability payments. The variations in the consumer price index are used into adjustments to retirement benefits.

Occupational Pension Plans Under the Belgian Pension System

Conventional defined benefit (DB) schemes have been prominent in Belgium, but defined contribution (DC) programs are quickly becoming the most common type of retirement plan in the country.

There are three distinct varieties of occupational pension plans: individual pension promises, company-specific pension plans, and industry-wide pension programs.

These can be issued by a pension fund, a group pension insurance product that is managed by an insurer, a collective pension savings account that is managed by a collective investment organization, or an individual pension savings account. 

The collective bargaining that takes place between business organizations and trade unions has the potential to culminate in the establishment of industry-wide pensions programs. Only one pension plan, such as an insurance program or retirement savings account, can be established for an entire sector of the economy by the business association and the labor union.

Employers are required to participate in such programs unless the collective deal gives them the option to opt out or contract with a different provider.

Having said that, in order for this to be a possibility, the employer must provide a corporate plan that is on par with the benefits provided by the standard industry plan. Because of this, the collective agreement establishes minimum requirements for each industry, so creating a pension market that is extremely competitive and professional.

As a result, social plans can be established, either as a pension scheme applicable throughout an entire industry or as a pension plan applicable to a specific company. They must offer perks for death or disability, but in exchange, they are eligible for unique tax advantages that are not available to participants in other types of pension plans.

Since 2004, defined contribution plans have been required to give a minimum guarantee that must be achieved during the lifespan of the individual participant. This minimum guarantee stood at 3.75 percent and 3.25 percent for employee and employer contributions, respectively, before the passage of a new law in January 2016 in which there is no consistent tax rate in effect anymore.

The rules of an occupational pension plan will typically specify the contribution rates that will be required from participants. The majority of plans are predominately funded by employers, with contribution rates typically ranging from 0.5 percent to 1 percent for workers whose income is at or falls under the social security threshold, and from 4 percent to 5 percent for workers whose income is at or over that barrier.

The benefits can either be distributed in the form of an annuity or a one-time lump sum payment. Both group insurance policies and pension funds can be used to fulfill the funding requirements of collective pension systems.

Personal or Private Pensions Under the Belgian Pension System

A private pension plan is yet another alternative, and you can set one up with the assistance of your bank or insurance company. A number of providers offer a variety of products that can be tailored to an individual investor’s unique set of circumstances as well as their willingness for risk.

You will be able to retain eligibility for a state pension even if you want to take control of your retirement resources while you have this type of pension. You have the option of making contributions to your pension plan, which will allow your savings to grow along with the interest you earn until the time comes for you to retire. Your contributions may qualify for a tax deduction when you file your annual return.

Banks and insurance companies both offer pension plans for those who are self-employed in addition to their own offerings. You have complete control over the amount that you pay in as well as the frequency of your payments, and your premiums can be deducted from your taxable income.

If an employee does not have access to an occupational plan that requires contributions of at least 3 percent of their salary, new regulations that went into effect in 2019 allow them to make payments to an individual auxiliary pension plan with whatever provider they choose. This is the case even if the employee does have access to an occupational plan.

Belgian Pension System expat workers
Expat workers in Belgium’s construction industry. Image by The Bulletin.

Belgian Pension System: Eligibility

You need to have worked in Belgium for at least five years for an employer who made payments to the Belgian National Office for Social Security in order to be eligible for a pension from the Belgian government. Workers who are self-employed have the opportunity to collect a Belgian pension under the same terms, provided that they have made contributions to the social security system in Belgium.

Employees, those who are self-employed, and civil servants all get their pensions from the same place: the National Pension Office. In the past, the Pension Office for the Public Sector disbursed pensions for civil servants, but that office and the National Pension Office have since consolidated into one.

What are the consequences if you are not qualified to receive the full pension?

Even if you haven’t put up nearly enough money for retirement by the time you turn 65, it is still feasible to receive a pension from the state.

If you are single and has monthly financial resources that are less than 1,121.72 euros (1,192.21 US dollars) or are either married or living together with financial resources that are lower than 747.81 euros per month, you are eligible to participate in the Income Guarantee for the Elderly (GRAPA) plan.

GRAPA is responsible for the administration of pensions for individuals with modest incomes. When your income drops below certain thresholds, the GRAPA allowance will kick in to help bring it back up.

Although you are qualified for a state pension that is more generous, it is possible that the amount you get will not be sufficient to sustain your needs.  Keeping this in mind, it is imperative to be ahead of the game and start planning for your retirement as soon as possible.

You are able to accomplish this goal by contributing money to a private pension plan. These plans can be obtained through a variety of large banks. Upon reaching the age of 65, participants often get their benefits in a single lump amount.

Since participants in these plans are subject to fines if they access the money before the age of 65, they are best suited for persons who intend to keep their money stashed away until that age.

Belgian Pension System: Retiring Early

If you have been laid off from your job and are qualified to receive unemployment benefits, or if you can demonstrate that you have worked the required number of years to be eligible for retirement, you may be able to retire early.

The following are the ages at which you are eligible to retire early:

  • Aged 60 and having served for a total of 44 years
  • Aged 61 and having served for a total of 43 years
  • Aged 63 and having put in a total of 42 years of service

In comparison to the majority of other nations in Europe, the disparity between the real retirement age and the legal retirement age is significantly wider in Belgium. By altering the tax rates that apply to pensions, the government has been working toward the goal of bridging such gap.

Those who retire at the age of 60 are subject to a tax rate of 20 percent, which is 3.5 percent greater than that which applies to those who are 65 years old. In addition, there is an additional rate of 10 percent in case you retire at the age of 65 but continue to be professionally engaged.

Pensions Available to Expats Under the Belgian Pension System

Whether or not your nation has a treaty with the government of Belgium determines if you will be able to transfer any of your existing pensions to Belgium.

Belgium has established bilateral pension conventions with a great number of nations, including the US, Australia, Brazil, Canada, the Democratic Republic of the Congo, India, Japan, Montenegro, the Philippines, South Korea, and Turkey, among others.

If you currently live in one of these countries, you are required to file your pension application to the organization that is in charge of administering pensions in the nation in which you currently reside. Make certain that you bring up the two-nation conventions.

QROPS for UK Pensions

It may be possible for British citizens who move abroad to transfer their pensions into a QROPS, which stands for a Qualified Recognized Overseas Pension Scheme (QROPS). Through the use of QROPS, expats are able to aggregate their several pensions into a single plan. This makes it easier for them to manage their retirement assets and shields them from the effects of currency volatility.

Although QROPS have a number of attractive features, not all retirees in the UK are qualified to use them, nor do they have access to them.

Costs and Contributions to the Belgian Pension System

Belgian Pension System fees
Fees and payments into the pension system in Belgium. Image by Racool_studio on Freepik

At this time, the maximum amount of state pension that may be received by workers with 45 years of service is 3,100 euros. This number might range from 1,800 euros for those who are self-employed to 6,700 euros for those who work for the government. These numbers are significantly smaller in actuality than they appear.

According to research conducted by ING Bank, the standard pension for employees is 1,100 euros, while the standard pension for civil servants is 2,600 euros, and the standard pension for self-employed people is 900 euros.

The number of years you have worked and the amount of money you have earned determine the amount of your pension. Your future pension will be determined by the National Pension Office and will be based on the average pay you have earned during your working life. This will involve converting former earnings to how much they would amount to in today’s market.

Belgian Pension System: Alternative Pension Types

A Pension for Survivors               

In the event that one of the partners in a marriage passes away, the other partner may be eligible for a survivor’s pension. They are required to be 45 years old, minimum, as a prerequisite for this.

However, they are still eligible to receive a survivor’s pension if they are aged below 45 years.  This is subject to the stipulation that they either have a kid or are disabled to the extent of at least 66 percent.

Even if you don’t satisfy these requirements, though, you can still be eligible for a temporary pension that lasts, on average, for one year.

If the dead partner was receiving a retirement pension at the time of their passing, the surviving partner is eligible to receive 80 percent of that pension. If the deceased person was not receiving a pension at the time of their death, the surviving partner is entitled to receive 80 percent of the pension that the deceased person would have been entitled to receive had they lived to reach retirement age.

This amount is based on the deceased person’s average wage at the time of their death. This form of pension is terminated either when the beneficiary remarries or when the recipient begins earning a pension of their own.

There are additional pension choices accessible to spouses who have divorced or who have separated from one another.

Belgian Pension System: Application for State/Public Pension

It is not necessary for you to submit an application for your pension if you are living in Belgium. Instead, the National Pension Office will get in touch with you a year before the date you are scheduled to begin collecting your pension. In a similar vein, if you intend to apply for GRAPA, you will be responsible for doing so yourself one year before to the day on which you are scheduled to retire.

Belgian Pension System: What About if You’ve Been Living Overseas?

If you are reaching the age of retirement in Belgium and live outside of the country but believe you are eligible for a Belgian pension, you may find yourself wondering where you should send your application for a pension. The terms and conditions change based on the nation in which you now reside.

You need to file your application to the local social security administration if you live in a country that is a member of the European Economic Area (EEA), Switzerland, or the UK.

If you now reside in an EEA nation that does not have a social security agreement in place with Belgium, you will be required to submit your application in person in the EEA nation in which you most recently held a job.

In the event that you were in Belgium, you would be required to hand your application over in person to any one of the qualifying organizations which are all located in Belgium.

The Federal Pensions Service (FPS) is in charge of the administration of pensions for employees and civil servants, as well as the payment of pensions to retired employees, self-employed individuals, and civil servants.

The National Institute for the Social Security of the Self-employed (NISSE) is in charge of researching the pension benefits that formerly self-employed individuals are entitled to. After that, the Federal Pensions Service is in charge of disbursing the pensions.

To qualify for a pension as a war veteran or war invalid or to have a mixed career, such as being an employee, being self-employed, or working for the government, it is recommended that you send your application to any of the Federal Pensions Service or the National Institute for the Social Security of the Self-employed.

Your application should be submitted to the local social security organization in your country of residence if Belgium has signed a social security agreement (including pensions) with the nation in which you are residing. This will ensure that your application is processed as quickly as possible.

Any and all sorts of Belgian pensions can be handed out to beneficiaries wherever in the globe, as long as they are Belgian, a citizen of the EU, or a person of a country that has an agreement with Belgium regarding social security. It is possible to collect a miner’s pension in almost any country on the planet, provided certain criteria are met.

Belgian Pension System: Final Thoughts

It doesn’t matter if you intend to stay in Belgium until you’re able to fully enjoy the economic benefits of the Belgian pension system or you certainly plan to travel a lot. The fact is that there’s no pension scheme in any territory that could cater to all of your retirement needs and facilitate a life of comfort and fulfillment for you later.

What pensions offered by governments can ensure for retirees is that they would not be absolutely destitute in their later years. True, there is no perfect pension system across the globe. However, contributing into the Belgian pension system would still be to your advantage in the long term. 

Pained by financial indecision? Want to invest with Adam?

Adam is an internationally recognised author on financial matters, with over 545.6 million answers views on Quora.com and a widely sold book on Amazon and a contributor on Forbes.

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