What is the impact of VSPSE for the employer? - AG Employee Benefits

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Published on 30/11/2018

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Here’s how your staff members can now save towards a supplementary pension

​The pension system in Belgium revolves around three key pillars:

  • 1st pillar: state pension payable by the federal government
  • 2nd pillar: supplementary pension via the employer
  • 3rd pillar: individual supplementary pension

75% of all salaried employees currently have a supplementary pension scheme through their employer. In some cases, the benefits are quite generous, but not always. This has prompted the government to provide all employees with the option to voluntarily save towards a second pillar supplementary pension by allowing employers to withhold contributions from their salaries. This initiative is known as the Voluntary Supplementary Pension for Salaried Employees, or VSPSE. 

 

Basic principle

The VSPSE was created for employees that have a modest supplementary pension or none at all through their employer or sector.

In practical terms, staff members can ask their employer to withhold a certain amount from their net salary and have it paid into a VSPSE scheme. Note, however, that contributions to this type of scheme are not unlimited.  

VSPSE contributions will be capped at 3% of the reference salary (or EUR 1,600 if 3% of the reference salary is less than this amount). The reference salary is calculated based on the total gross remuneration subject to social security charges paid to the staff member two years prior to setting up the scheme. 

From this amount, the supplementary pension rights that have been acquired for the reference period in question will be deducted.

This means that staff members that have already exceeded the 3% cap or EUR 1,600 will not be allowed to make any further VSPSE contributions.


 

Example of calculation of the VSPSE contribution


Assumptions:

  • S on 1/1/2017 = EUR 50,000
  • Reserves on 1/1/2017 = EUR 25,000
  • Reserves on 1/1/2018 = EUR 26,000
  • Average interest rate over last 6 calendar years prior to year of accrual at 10Y OLO yield: 1%

⇒ VSPSE contribution:

  • 3%S = 3% x EUR 50,000 = EUR 1,500
    but as < EUR 53,333 → flat-rate contribution = EUR 1,600
  • Growth in reserves net of LCP-guaranteed return during reference year
    = 26,000 – (25,000 x 1.01) = EUR 750
  • Maximum VSPSE contribution = EUR 1,600 EUR – EUR 750 EUR = EUR 850

 

Tax implications

The table below highlights the main tax considerations for VSPSE (2nd pillar) and individual supplementary pension (3rd pillar) schemes. Note that VSPSE contributions are taxed in the same way as individual contributions to a group supplementary pension scheme.
Private pension savings (3rd pillar) are subject to different (more attractives) tax regulations. Currently, roughly 65% of Belgians set aside funds in a private pension savings solution.

 

*30% on contributions up to EUR 960, 25% on all contributions if the total is between EUR 960 and 1,230.

 

Up to the staff member

Your staff members are free to decide:

  • whether they want to build up (additional) supplementary pension entitlements via a VSPSE scheme
  • how much you can withhold from their net salary (subject to the maximum cap) for this purpose
  • their preferred supplementary pension investment solution, Branch 21 or Branch 23
  • the pension institution they have selected to manage their VSPSE scheme. They will provide you with a VSPSE attestation as well as the pension institution’s contact and bank details.

Staff members are required to notify you at least two months in advance regarding their intentions for their VSPSE scheme. The same notice period also applies to any modification or suspension of contributions (up to a maximum of two times per calendar year).

 

Paperwork for the employer

As you can see, participation in a VSPSE scheme means extra paperwork for your HR organisation. Not only do you have to keep a record of and adjust individual staff member selections, but also pay the VSPSE contributions withheld from their salaries to their desired pension institution.

    

How to avoid this extra administrative burden?

Not excited about the prospect of taking on these additional tasks? With contributions to your own supplementary pension scheme of at least 3%, you can bypass this extra administrative burden entirely. In addition, this adjustment to your scheme can be considered as your first step towards harmonising status differences between blue-collar and white-collar staff members in terms of supplementary pension entitlements.


Interested in more information about this topic? Feel free to contact your regular AG Employee Benefits representative. Or contact us via our contact form
.