What is a supplementary pension?

A supplementary pension is a nest egg that you build up over the course of your career with the help of your employer or sector. When you retire, the savings you've accrued will be paid out to you, on top of the state pension payable by the government authorities.  

Roughly 75% of employers contribute to a supplementary pension for their employees.There are good reasons why they do this:

• Belgium's state pension is among the lowest in Europe, so a little extra is always welcome.
• With a supplementary pension, your employer protects the purchasing power of you and your family, even after you retire.
• On top of a supplementary pension, your employer may also provide additional benefits such as death benefit coverage. With this extra coverage, the beneficiaries named in your contract will be entitled to a lump-sum payout if you die before retirement. Your employer also helps to protect your family.
• A supplementary pension also is a tax-efficient way to boost your earnings, which benefits both you and your employer. Your net take-home amount is higher.

How do you accrue a supplementary pension?
 

The sponsor of a supplementary pension – i.e. your employer or the sector you work for – will arrange for the supplementary pension benefits to be paid out to you and to your colleagues. This is known as a corporate plan or sector-wide plan. Your employer or sector will contribute to this supplementary pension plan on a monthly or annual basis by paying premiums. In some cases, you may also be allowed to make individual contributions. Your employer will take out the supplementary pension plan with a pension institution.
This might be an insurance company (group insurance), or the employer may manage the plan itself (pension fund).

The premiums get invested and earn a certain return, which allows you to grow your supplementary pension nest egg over time.

Management and payment of your supplementary pension benefits

How is the supplementary pension managed?
 

The employer is required to transfer the premiums to a pension institutionthat manages the accrued savings and pays the entitlements out to you when you retire. Management of your supplementary pension by a pension institution guarantees that your precious nest egg will remain intact if ever your employer is taken over by another company, has financial difficulties or goes bankrupt.

When do you begin to accrue a supplementary pension?
 

Enrolment takes effect on the day you join the company, provided that you fulfil the eligibility criteria. As of 1 January 2019, enrolment can no longer be subject to a minimum age or seniority requirements. In addition, waiting periods have been eliminated, which means that supplementary pension rights will be granted immediately, upon enrolment.

As a plan participant, you also have the right to request additional information about the requirements for accruing a supplementary pension as well as the consequences for your supplementary pension if your employment relationship is terminated. You'll find more information about these consequences in the key moment "I’m leaving my employer shortly" .

How will the supplementary pension be paid out?

Employees collect their supplementary pension benefits when they retire. Depending on the terms of the pension plan, the accrued entitlements will be paid out as a lump sum or as an annuity.

To find out everything you need to know about the payment of your supplementary pension, the pros and cons of a lump-sum payout vs an annuity, click here.

Two important documents: the pension plan regulations and the benefits statement

• Every year, you'll get a benefits statement that includes information such as the current total gross value of your nest egg (= the accrued reserves), the amount you'll be able to claim when you retire, and also how much your beneficiaries will collect if you die before retirement age.
  
  It's not always easy to make sense of a benefits statement. That's why we've put together some very practical explanatory notes.
   
• Your pension plan regulations contain the rules applicable to your supplementary pension. This document describes who is eligible for enrolment, who pays the premiums and when you can collect your supplementary pension. To claim your benefits, you can contact your current or previous employer and your pension institution. It's definitely a document worth reading, if only to get a better picture of what you can expect after your retirement.