Who decides how much goes into your supplementary pension?

Pension saving through the employer can be done in two ways. Or you have a plan with a fixed benefit (defined benefit), which determines the amount you will be paid at your retirement age. Or you have a plan with a fixed contribution, whereby part of your salary goes into the pension plan every month. To be clear: the employer determines which plan is granted and how much is deposited or paid out.

The vast majority of plans offered today are defined contribution plans. This is because these other plans, with a fixed benefit, entail a lot of uncertainty for the employer. The benefit is usually expressed as a percentage of the last annual salary. If the annual salary rises sharply at the end of the career due to indexation or general wage increases, the employer will have to pump significantly more into the plan in order to meet the payment.

For fixed contribution plans, a percentage of the salary is paid into the plan every month. A wage increase therefore means that the employer will pay more into your pension plan. But here the employer does not have to compensate for the past, so that the employer’s additional payment is limited to the indexation of the wage.

Just as with defined benefit plans, the employer is subject to the return guarantee, which is stated in the Supplementary Pensions Act. This stipulates that every payment into a supplementary pension must yield at least 1.75 percent per year (return before 2024). It concerns an average return over the term of the contract. It is the employer who must guarantee the return, but it is usually the pension plan administrators – insurers or pension funds – who can guarantee that return.

There are still variants of the plans with a fixed contribution that are becoming increasingly popular. These are cash balance plans. Simply put, these are plans that guarantee a higher return than the statutory minimum return.

Figures from the Belgian financial supervisory authority FSMA showed at the end of 2023 that only 4 percent of affiliates still have a defined benefit plan running. Yet these plans represent no less than 33 percent of the acquired reserves.