Why save for your pension?
1. The state pension is not enough
Working Belgians are entitled to a state pension from a certain age, which is usually around 60% of their last-earned salary. In other words, your income will be cut almost in half when you retire. And depending on your status, the amounts can differ significantly:
|Average gross pension|
|Self-employed individuals||891 euros|
|Civil servants||2.978 euros|
Source: PensionStat.be (01/2021, in Dutch)
The above figures are gross amounts. Another important fact is that the higher your pension, the more heavily it will be taxed. This means that, for most people, the state pension is not enough to maintain their standard of living after retirement.
Pension saving allows you to build up a supplementary pension on top of your state pension. And generally, the sooner you start, the more you can save for your retirement. That’s why we would advise you to start saving for your pension as early as possible. It’s also the best way to optimally benefit from the next two reasons to start saving for your pension.
2. You can get annual tax relief
While saving for your pension is mainly for later – say, when you retire – it offers benefits for the present too. As the government strongly encourages pension saving, you are given the opportunity to earn tax relief of up to 30% of your paid pension contributions. The exact amount of tax relief depends on the tax treatment in your individual situation, but generally, the following currently applies: if you are saving for your pension (and paying taxes), the tax authorities will offer you annual tax relief until the year you turn 64.
It also depends on the maximum tax-deductible amount you choose. If you save up to 990 euros per year, you can get back 30% of your deposited amount in tax. If you’d rather save a bit more, you can choose a maximum amount of 1,270 euros and get back 25% of that amount. Your maximum tax benefit would then be 297 euros or 317.50 euros, depending on the amount you choose.
3. The return on your pension savings (and the return on the return)
The third and final major advantage of saving for your pension is the return you can earn on your savings – and the return on that return. Because any return earned on your pension savings this year is also added to your pension savings. This means that in the following year, you can earn a return on the previous year’s return, creating a snowball effect that allows your pension savings to grow at an ever-increasing rate each year.