Supplementary pension and group insurance both refer to additional financial provisions for employees. These terms are often used synonymously, but there are some differences. Group insurance is broader and includes death cover. Supplementary pension refers to the extra financial support you receive when you retire.
As an employer, you can build up a supplementary pension for your staff on top of the statutory pension. This is an interesting benefit because employees can use this financial contribution to maintain the same standard of living after retirement. Today, a supplementary pension is particularly attractive since, unfortunately, the statutory pension provided by the government is often insufficient.
A supplementary pension has advantages for everyone: employers, employees, self-employed, ... We see such plans popping up in both large and small companies. Large companies have been offering this for some time, often in combination with a cafeteria plan. At the same time, the “war for talent” turns out to be a major incentive for small companies to follow this example.
You can offer a supplementary pension plan or group insurance scheme for all employees or for a specific category of staff, such as managers or white-collar workers. If you start working at a company that offers such a collective plan, you join automatically.
The choice of a supplementary pension plan or group insurance scheme lies with the employer. It is also the employer who determines the contribution and arranges the payment. A fixed percentage of the salary is usually taken, for example 5% of the monthly salary.
As a caring employer, this benefit not only allows you to differentiate yourself in the job market, it also comes with an attractive tax benefit. Employers pay less in social security contributions (NSSO) than what they would pay on top of a salary if there were no group insurance. For employees, this means a greater financial benefit than a pay rise.
Several investment options exist within group insurance and supplementary pension. The principle is: the higher the risk you are willing to take, the higher the return.
- In Branch 21 the return is fixed. The risk is usually placed with an insurer, which guarantees a fixed interest rate over the whole term until retirement age, whether or not in combination with a profit share.
- In Branch 23 the risk is placed with an insurer or pension fund. There is no interest rate guarantee. This system offers more flexibility and the possibility of higher returns, but involves a higher risk. This means that returns can also be negative.
Clear communication to employees about the chosen investment and the expected return is recommended.
If the insurer does not meet this minimum return of 1.75%, the employer must make up the difference. This prompts some employers to change insurers or investment strategies. The rate may rise to a maximum of 3.75%, depending on the development of 10-year government bonds (OLOs, or linear bonds). With government bonds and financial markets performing better, this return is expected to rise from 1.75% to 2.5% on 1 January 2025.
Job hopping - frequently changing employers - means that people nowadays often have multiple employers over their careers. This results in participation in several group insurance schemes, the terms of which may vary. This is not an issue as such, but keep in mind that staying longer with one company often leads to higher returns.
Nevertheless, the pension capital already accrued remains yours. Unlike in the past, you can no longer have it paid out if you change employers. For this, you have to wait until your legal retirement. The reason is the favourable tax treatment associated with it.
The online platform My Pension gives your employees a 24/7 overview of the statutory and supplementary pension they have already accrued during their career. With every employer, insurer or pension fund.
