Prof. dr. Yves Stevens, institute for social law, President Belgian occupational pension boar
What is the system of pension insurance in your country and which are the specific pension insurance practices?
The pension system in Belgium is characterised by the coexistence of different schemes.
The public mandatory pillar is still the milestone of the entire system representing the main source of income for the elderly. The social insurance program is divided into
different regimes: that for private-sector workers, that for self-employed, and that for civil servants.
The basic safety net is represented by social assistance benefits. They are a series of provisions for old-aged people in need. Moreover, there is the specific minimum guaranteed benefit: the GRAPA
(Garantie de Revenues aux Personnes Agées) means-tested benefit. It is financed through taxation and is directed to cover people in need or with insufficient resources. This benefit is provided to
people at the statutory retirement age.
As to the pension system, per se, the first public and mandatory pillar consists of different regimes and is supplemented by means-tested benefits. For people with a shorter workingcareer, a
Minimum Pension is granted under the condition of having at least a working career of 35 years. For people with at least 15 years of contributions, moreover, there is a top-up mechanism to credit
contributions for flexible careers. All these measures are directed to increase the redistributive impact of public pension programmes. The legal retirement age is 65 for men and 64 for women.
Through a transition period until 2009, the retirement age for women will be gradually increased to reach that of men. A full pension is based on 45 years of contributions (44 for women but with
the gradual increase to 45 in 2009). The average pension for private-sector employees and self-employed is calculated by adopting a ratio (between 60 and 75%) of average life-time revenues (in the
45 years of contributions). For public-sector employees, pensions is calculated on the best 5 years of revenues.
The second pillar is mostly privately run and works on a voluntary basis. The pillar consists of supplementary funded pensions including survivors’ benefits. Traditionally,
the supplementary schemes are based in Belgium on the discretionary will of the employer. Recent reforms had the aim to improve the role of occupational funds defined through the collective
agreements (Sectoral Pension Plans). All these schemes are financed though contributions and fully-funded. They are (quite strongly) favoured by tax incentives. Approximately 44% of the population
has a pension scheme, which is a form of investment that enables people to build up capital in a fiscally advantageous manner by the time they retire. The pension benefit can be taken up in a lump
sum without penalty. Annuities were fiscally reprimanded for a long time. Since 2003 lump sums equal annuities.
The third pillar is private, individual, and voluntary. The third pillar is usually implemented through two different programs: first, the Pension Savings Schemes
introduced in 1987. They are financed by a fixed sum contribution per year. The second option is Life Insurance Schemes, including annuities and insurance plans. House savings schemes are
particularly widespread. Third pillar schemes cover around 70% of the entire population. In 2002, their assets amounted to around 20% of GDP.
What are the public feelings about the private occupational pension schemes in your country?
Depends on who you talk to. Some consider it absolutely necessary. Some consider it a hidden form of pension privatization. The fact that most pensions are paid in the form of lump sums is an
important element in the debate. Most people consider their supplementary pension a form of deferred remuneration.
Which, in your opinion, are the major challenges facing the European pension systems in the context of the modern realities?
The major challenge is clearly the combination of good risk management and the division of responsibilities and rights between all the players involved. I call this the “need for multi-tasking” for
the different challenges.
In this multi-tasking some tasks must go to the European level.
RISKS INVOLVED
Political risk
- the break down risk of government regulation
- the collapse of public pension management
Demographic risks
Inflation risk
Longevity Risk
Investment risk including volatile investment returns
Company Insolvency Risk
- the employer
- the pension fund
- the insurance company
Individual risks
Fraud
MULTI-TASKING FOR DIFFERENT CHALLENGES
Too limited coverage for some pillars
Possible restrains of economic growth
Possibility of stagflation and hence unemployment
No equality efficiency (Matthew effect)
No administrative efficiency
No cost efficiency
Too expensive
transmitting correct and transparent information
clear regulating
clear delimitation of tasks
identification of actors
internal and external controls
SOURCES OF RESPONSIBILITY:
national: contract, fiscal, public, social
european: prudential, accoutinginsurance
In what aspect must the reforms be carried out?
- More European social competences
- Less fiscal freedom
- More pillar coordination
Which are the major challenges facing the pension insurance systems of the EU acceding countries, among which is also Bulgaria?
- Additional incentives for employees born before 1960.
- The strengthening of the pension system of the civil servants.
- Examining the possibilities of a professional fund
- Specific mortgage options for civil servants
- Accounting the care for children in the pension
- The development of a poverty program linked to the third pillar.
- The avoidance of a misselling in the second pilar.
- A good and efficient control mechanism of the financial actors involved.
- A stable state guarantee on the occupational funds.
- Further development of pension IT tools in the second pillar for information flows.
- A possible creation of sectoral funds: collective instead of individual accounts
- The creation of an national pension ombudsservice for all forms of pensions.
- A stable economic growth … as in every country.
Prof. dr. Yves Stevens is scientific associate of the Institute of Social Law of the Katholieke Universiteit Leuven. Complementary pensions form his main legal research domain whereby he
follows both the Belgian and the international evolutions.
He has published a great deal on the broader pension issue both in international and national legal periodicals.
He is a member of different expert groups (both private and public) in relation to complementary social security.
He is the president of the Belgian Occupational Pension board and member of the Supplementary Pension board for the self-employed.
He chairs a specific law shool chair on pensions for the pension professional (leergang pensioenrecht).
He is the treasurer of the European Network on Supplementary Pension) Researchers (ENSPR) and member of the European Social Security Institute.
