Long-term saving between the ages of 54 and 64: choose your savings amount wisely
Why the amounts you pay in at the outset are important later
Carefully choose the amount you save
With a long-term savings plan, choosing what to save is a bit more complicated than with a pension savings scheme. That’s because how much you may save to ensure you benefit from the maximum amount of tax relief possible depends on your individual circumstances and your income.
So how exactly do you work that out? Our advice is to calculate the optimum savings amount as accurately as possible using a clear formula and your most recent tax assessment notice.
The amount you save in the first year determines the amounts for subsequent years
After calculating your optimum savings amount, it’s important that you pay this amount into your long-term savings plan in the first calendar year.
If you start long-term saving between the ages of 54 and 64, the amount you pay in during the first calendar year will be fixed for the remaining term of your contract. That is then your personal maximum figure. After the first calendar year, you can always save less, but never more than that amount again. For example:
- You’re 58 and you set up a long-term savings plan
- You pay in a total of 1,500 euros in the first calendar year
- Your personal maximum figure will then be 1,500 euros
- You may save a lower amount in later years, but not more
If you decide to save less than your optimum savings amount in the first calendar year, that amount becomes your personal maximum and you cannot increase it again.
Important: If you set up your long-term savings plan in December, you should preferably save your full amount before 20 December to ensure it is processed in your contract before the end of the calendar year.
Why is that?
With a long-term savings plan, you pay a one-off final tax of 10%.
If you started before you turned 55, you usually pay this tax on your 60th birthday.
If you started when or after you turned 55, you usually pay it 10 years after the start of your contract.
Increasing the amount you save means that payment of this tax is deferred to a later time. This is highly detrimental from a tax perspective and the reason KBC Brussels does not permit you to increase that amount again.
Calculate your optimum savings amount
Keep your options open and choose an amount at the start of your contract that also fits in with your long-term plans.
FAQs
What’s the situation if I save by standing order?
If you’re saving by standing order, keep a close eye on the total amount you’ll have paid in during the first calendar year. If it’s less than what you actually intended to save, that lower amount becomes your personal maximum figure and you cannot increase it again later. If you want to set a higher amount to keep your options open, make an additional lump-sum payment during the first calendar year.
What happens to my long-term savings plan after I turn 65?
If you already have a long-term savings plan and your contract ends when you turn 65, you have until your 64th to take out a new contract that runs for longer. This means that you could continue to earn tax relief even during retirement.
