Recently, many press articles about the approved pension reform and supplementary pensions have been published. But which information is accurate and complete? What about employees who continue working beyond the end age of their supplementary pension? In particular, “dormant” defined contribution contracts in branch 21 raise questions…
It is important, as an employer, to have clear and accurate information, so you can confidently guide your employees at any time.
Working beyond the end age of the pension plan: a clear framework
The statutory retirement age has gradually increased in recent years: first from 60 to 65, and since the beginning of this year to 66. This trend will continue, as the statutory retirement age will reach 67 by 2030. Additionally, since 2016, the supplementary pension capital is only paid out once the employee effectively retires, whether early or not.
The end age in supplementary pension plans follows the same evolution. New pension plans already take into account the future statutory retirement age (67), while existing plans still have an end age of 65 (or, in some cases, 60). Only employees who join a plan after an increase in the statutory retirement age fall under the new age limit.
👉 But what if the end age in an employee’s contract is lower than their statutory retirement age?
Article 27 of the Law on Complementary Pensions (LCP), as amended by the law of 18 December 2015, states that the pension commitment remains in force until retirement. In addition, Article 13 stipulates that members continue to build pension rights as long as they remain in service.
In practice, this means that as long as your employee does not retire, the contract is automatically extended and continues to build up according to the rules of your pension plan.
What return applies to these extended contracts?
- Branch 21
The guaranteed return continues to apply to the accumulated reserves (and to future premiums if a guaranteed interest rate applies) until the original end age. In case of extension, the reserves (and any future premiums) are invested at the interest rate applicable at the time of the extension.
Just as before the extension, AG may supplement this guaranteed return with profit sharing.
- Branch 23
The reserves remain invested in the selected funds and continue to benefit from their performance.
What about employees who have left the company?
For so-called “dormant” contracts, the reserves continue to generate returns according to the same principles described above. The only difference is that no new contributions are paid by you as employer. The accumulated reserves remain preserved.
A stable framework for your HR policy
These elements show that working longer does not have a negative impact on your employees’ supplementary pension. The legal framework guarantees continuity and allows you to continue offering a reliable and sustainable supplementary pension, even when employees extend their careers.
💡 Good to know
In MyAG Employee Benefits, your employees’ pension capital is projected up to the end age specified in their contract. Depending on the hiring date, this age may still be 65. As a result, some employees may wonder why no projection up to 66 or 67 is shown.
The explanation is simple: as long as the extension of the end age has not been formally established, the corresponding rates are not yet known. Therefore, a new insured capital cannot yet be determined.
Questions ?
Do you have any questions? Your AG contact person will be happy to review your supplementary pension plan together with you and answer all your questions. Do not hesitate to schedule a meeting.