Avoid too high taxes on your supplementary pension

Anyone who opts for a payment in capital will see that a ZIV contribution and a solidarity contribution are first deducted from the gross amount – the accrued reserves that you will find on the pension statement. The contribution to the Sickness and Disability Insurance is 3.55 percent. The solidarity contribution is between 0 and 2 percent, depending on the size of your supplementary pension.

After these two social deductions, the withholding tax follows. The calculation of this tax is a complicated matter, because the rate depends on various factors. Firstly, the withholding tax is different depending on the origin of the capital. Contributions from the employer for the supplementary pension are taxed differently than contributions from the employee (see table). Furthermore, the proceeds arising from profit sharing that have yielded group insurance policies in addition to the guaranteed interest rate are tax-free.

But the moment at which you retire will also determine the tax rate. And that is within your control. The moment of retirement plays a role in employer contributions, which usually make up the bulk of the supplementary pension capital.

A large group will be taxed on those contributions at 16.5 percent. This happens when you retire before your statutory retirement age without having had a full career of 45 years. Rates of 18 and 20 percent are also still possible, and apply to people who can take early retirement at the age of 61 and 60 respectively and then have all their pension capital paid out without actually retiring.

There are two options for being taxed at the lowest rate of 10 percent. Or you have had a full career of 45 years. Or you only retire at the statutory retirement age. Until 2025 this will in principle be 65 years, between 2025 and 2030 it will be 66 years and from 2030 it will be 67 years. There is also the important condition that you have been ‘effectively active’ in the three years before the statutory retirement age or the age at which the conditions for a full career have been met.

But what is ‘effectively active’? “In practice, there is often uncertainty about that term and which equated periods are or are not included,” says Pieter Gillemon, pension specialist at PwC. For this reason, the Federal Public Service Finance published a circular at the beginning of October that lists the equated periods. ‘Following the many questions in the field about this, there was a need to expand the existing list with some new equated periods of activity. In addition, some positions on periods of activity that had already been equated were also reexamined,” the circular said. Here we list the most important assimilated periods.

Anyone who becomes involuntarily unemployed in the three years before retirement, remains available for the labor market and does not refuse suitable training or a job, is equated with ‘active’. From now on, this applies to all unemployed people, not only to those unemployed who remained available in an adapted SWT system, the former early retirement pension. Adapted availability means, among other things, that you were registered as a job seeker and cooperated in adapted guidance through an individual action plan.

If the older unemployed person has been exempted from the obligation of adapted availability or has been excluded from the right to unemployment benefits, there are no equated periods.

Temporary unemployment takes two forms. Either due to force majeure or for economic reasons. Both forms of temporary unemployment count as an equivalent period. “The right to benefits for temporary unemployment presupposes that all conditions for obtaining that benefit are in principle met,” the circular reads. This means that anyone who falls into temporary unemployment in the three years before retirement is still considered ‘effectively active’.

A dismissal in the three years before retirement does not necessarily have an impact. Both the period of dismissal with entitlement to unemployment benefits and the period of dismissal without entitlement to unemployment benefits due to severance payments or severance compensation payments are regarded as a period in which you were actually active. A new position from the administration removes the condition that the dismissal occurred without the employee’s will and that the employee must remain available for the labor market and be registered as a job seeker.

Even if you become ill during the last three years, you do not have to fear. The period during which the person receives statutory sickness or disability benefits is considered an assimilated period. The condition is that the person had the status of employee at the time of the incapacity for work.

Thematic leaves where you are entitled to a career reduction for a maximum of half of a full-time job regardless of your age are considered as equivalent periods. For leave to provide assistance or care for a seriously ill family member, work may even be (temporarily) stopped for more than half. The same reasoning applies to the period of palliative leave or leave for informal care.

Furthermore, leave for compelling reasons or the period of unpaid leave of up to ten days per calendar year also falls under the equivalent periods.

Part-time work is also treated as equal, provided you continue to work at least half-time. Please note that periods in which only a flexi-job is performed cannot simply be equated with periods of activity. A flexi-job can be performed without you working at the same time, provided that you have worked at least four-fifths at least three quarters previously.

The above conditions also apply to self-employed persons. For them, ‘effectively active’ is defined as being affiliated with a social insurance fund. In addition, a self-employed person must have paid social contributions during that period. Even if there is an exemption or deferment of payment of contributions, the self-employed person remains effectively active.