Comparison belgium pension savings formulas
Now that I have made detailed cases for three tax-advantage pension saving schemes, let’s summarize the three formulas in an easy overview.
The detailed posts can be found here:
- personal pension saving: Individueel Pensioensparen / Epargne Pension
- VAPZ (Vrij Aanvullend Pensioen Zelfstandigen) / PLCI (Pension Libre Complémentaire pour Indépendants)
- IPT (Individuele Pensioen Toezegging) / EIP (Engagement Individuel de Pension)
| Pension Saving | VAPZ | IPT | |
|---|---|---|---|
| Savings amount per year (€) | 960 | 8.17 % of taxable income; for an income of 36 k / year that's 2941 € | Magic 80 % rule - typical 3600 € / Year |
| Fund Type | TAK21 (interests) or TAK23 (Invest) | Only TAK21 (saving / interests) | TAK21 or TAK23 |
| Entry Fee (to the bank) | 3 % | 3 % | 2 % |
| Tax advantage (at entry) | 310 * 960 = 32 % | Up to 53.8 % (depends on tax bracket and city tax) (ignores RSZ discount because it is eliminated by lower state pension) | Avoid 20,4 % company tax + 30 % RV = 44,3 % You pay 4.4 % taxes at entry |
| Fund average return | 7.0 % | 1.2 % | 7 % (TAK 23) |
| Money available at | Age 60 | legal retirement age (67) | Age 65 (at 10 % taxes) |
| Taxes | 8 % on deposit + on virtual 4,75 % Taxed at age 60. | Half of the savings are taxed at highest bracket. Typically 40 % x 0.5 = 20 % taxes on savings +3,55 % RIZIV + 2 % solidarity | 10% at retirement +3,55 % RIZIV + 2 % solidarity |
| Annual Total Return before inflation | 8,1 % | 2,2 % | - 0,9 % on the pre-tax (gross) company money (3211/3600) + 3.7 % on post-tax money (3211/2006) |
| Annual Total Real Return (Inflation adjusted) | 5,2 % | -0,6 % | - 4,0 % on the pre-tax (gross) company money + 0.5 % on post-tax money |
VAPZ and IPT are not really favorable savings formulas are they? They protect against inflation and encourage you to save. That’s it. They are NOT the fantastic tax-advantageous savings formulas for your retirement:
- VAPZ is only available in the interest-savings fund TAK21, which makes you lose all your money by melting it away by inflation. By the time you retire, you have to pay the 40 % taxes anyway (+3.5 % + 2 %), which is something most banks simply avoid to tell you.
- IPT does not offer you any tax discount at the start, it even imposes a new additional tax at the start (4,4%) (+ 2 % commission to the bank). You do avoid extra company profit taxes and RV, but you have to pay 10 % taxes (+ 3.5 % + 2 %) at the end. The loss of 6.4 % at the start and 10 % at the end takes away most of the tax benefits.
- Only ‘Individual Pension Saving’ seems any good, because taxes at entry are zero AND you can invest in a proper (stock market) fund. 8 % taxes in total. Plus 30 % tax benefit at the start. After 56 there is even a larger advantage.