Increased guarantee on contributions in a pension scheme as of 2025

Many employers have a complementary pension scheme in which the employer, and in some cases also employees, pay contributions to build up a complementary pension. In most cases, it's a defined contribution type of pension scheme, ie the contributions are a percentage of the remuneration. The employer's obligations aren't limited to paying the contributions stipulated in the pension scheme, as they also have to respect the average minimum guaranteed return imposed by article 24 of the Act of 28 April 2003 on complementary pensions.

As of 2016, the percentage of this minimum average is no longer included in the Act. The Act now stipulates the percentage of the guarantee is the average return on 1 June of a ten-year bond issued by Belgium, rounded to the nearest 0.25%. The percentage should nevertheless be at least 1.75% and maximum 3.75%. The average is calculated annually with effect on 1 June, and the new percentage applies as of 1 January of the subsequent year. Since 2016, the percentage has been 1.75%.

While the Financial Services Markets authority should legally publish its percentage by 1 December, it's already announced that the percentage will increase to 2.5% as of 1 January 2025.

The impact of this change will depend on whether the pension scheme uses the horizontal or the vertical calculation method. Both are legally possible so it depends on which system is stipulated in the pension regulations. Under the horizontal calculation method, the new percentage only applies to new contributions, so the old rate continues to apply to contributions paid in the past. Under the vertical calculation method, the new percentage directly applies to all contributions in the scheme, including those paid in the past. The horizontal method is more common. The new rate of 2.5% will only apply to the contributions paid in the future, so the impact of the increase as of 2025 will be limited if the horizontal method applies.

The guarantee is an average triggered in a number of cases, notably when the employment contract is terminated or when the employee reaches retirement age. If the annual return during a given year is lower than the applicable minimum, it can be compensated by the returns in other years if the average is not triggered.

If the average is triggered and the actual return on the premiums is lower than the guaranteed minimum, the employer has to pay the extra contributions necessary to reach the applicable minimum. The fact the employer has already paid the contributions stipulated in the pension regulations is irrelevant.

The average minimum guarantee only applies to the employer and employee premiums paid for the pension coverage. It doesn't apply to the premiums used for the death coverage or the premiums used for a disability coverage. The costs for the administration of the pension scheme can be deducted from the minimum to be reached, subject to the condition that these costs can be maximum 5% of the premiums paid in the pension scheme.