Current legislation relating to supplementary pensions allows the following at present:
- Affiliation to the pension scheme occurs immediately for employees aged 25 or over. This rule grants the person setting up a pension plan the right to decide from what age an employee may join, provided that it is no later than the date of his/her 25th birthday.
- For reserves funded by the employer, the member may – after one year of affiliation to a pension scheme – claim the acquired reserves and payments in accordance with the rules of the pension scheme.
The regulations of the pension scheme may deviate from this rule, and, for example, stipulate that the reserves are acquired either immediately or after 6 months. If no provisions are specifically stated in the pension scheme regulations, the reserves are only acquired after one year of affiliation.
Please note that personally funded reserves are always acquired immediately.
The European Portability Directive seeks to increase employee mobility between member states by improving the acquisition and retention of supplementary pension rights. Under the Directive, the minimum affiliation age may not be higher than 21 years, and the (combination of) waiting or threshold periods for the acquisition of reserves may not exceed three years. The combination of an affiliation age of 25 years with the one-year affiliation rule for the acquisition of reserves means that current Belgian legislation is in conflict with the European Portability Directive. A change in our legislation was therefore also necessary.
By opting to introduce immediate affiliation and immediate acquisition of reserves, our Belgian legislators went much further than what was required by the Portability Directive.
The impact of these legislative changes on supplementary pension schemes should not be underestimated:
- It will no longer be possible to apply an affiliation age limit to a pension plan from 1 January 2019. This means that from 1 January 2019, employees will have immediate affiliation to a pension entitlement, even if they have not reached the minimum age as set out in the pension scheme regulations. This measure does not prevent other affiliation criteria from applying (e.g. certain jobs, certain categories, etc.).
- A qualification period will no longer apply to the pension plan reserves. If a current pension plan prescribes a qualification period, that period will be deemed to have been fulfilled on 1 January 2019. For example: a pension plan has a qualification period of 1 year. An employee joins on 1 July 2018. Under this new legislation, the employee will be deemed, as of 1 January 2019, to have complied with the conditions, even if the qualification period of one year has not yet been reached. Therefore, from 1 January 2019 this employee will be entitled to the acquired reserves.
- It does appear that this legislation may lead to an additional administrative burden on pension fund managers and on insurance companies. As there is an immediate entitlement to reserves, there will often be cases where extremely small reserves will still need to be managed for many years. All that the legislation requires at present is that when the acquired reserves amount to less than EUR 150 at the time of the employee’s departure, the funds are not able to be transferred to another pension institute. The Sigedis database should be informed about the reserves (however small).
We expect most insurers to issue by the end of 2018 a general annex to the actual pension schemes in order to align them with the new legislation by 1st January 2019. However, since this legislation is an imperative law, it will automatically be applied as from 1st January 2019, even if the pension scheme would still contain other stipulations at that moment.
The scrapping of the affiliation age limit plus the direct entitlement to reserves will lead to an increase in the price for supplementary pension schemes for many employers. The question is whether it was opportune, when implementing the Directive into Belgian legislation, to adopt a broader implementation than was required by the EU.