2012 IGP Seminar Panel Presentation for Belgium

Transcription

1 Country Panel Session Belgium IGP Seminar September 11-13, Boston Mr. Hans Callebaut Deputy General Manager Major & International Accounts AG Employee Benefits Agenda Introduction to Belgium The Belgian Social Security 1.1. The First Pillar 1.3. The Third Pillar 2. Disability 3. Medical 2

2 Introduction to Belgium Basic facts Established in 1830, after secession from the Netherlands inhabitants Ten provinces and Brussels as the capital city Famous for 3 Agenda Introduction to Belgium The Belgian Social Security 1.1. The First Pillar 1.3. The Third Pillar 2. Disability 3. Medical 4

3 1.1. The First Pillar = The legal pension The First Pillar Key Characteristics System Pay-as-you-go Benefits 75% or 60% of average salary for employees in private sector with ceiling of ,66 EUR in % of average salary of the last five years for public servants Funding Premium payment by employees and employers 6

4 1.1. The First Pillar Indexation Employees: inflation Public servants: inflation + extra indexation linked to the growth of real salaries of the active public servants Retirement age 65 for men and women The First Pillar PENSION Career Salary Family Situation Basic calculation formula Single: n/45 x 0,60 x S i Married couple: n/45 x 0,75 x S i Salaries limited to a ceiling (49.773,66 EUR) taken into account 8

5 1.1. The First Pillar Substantial gap between last salary and legal pension 78% of the Belgian population believes that their legal pension will be over 1000 EUR a month. In reality only 38% of the Belgian pensioners receive EUR or more. Average gross pension 2011 Salaried employees Men Women 1099 EUR 820 EUR The legal retirement age is 65, but the average retirement age actually is 58 Source: National Pension Institute, = The complementary pension financed by the employer 10

6 Key Characteristics Financing vehicles Group insurance or pension fund Group insurance represents 75% of the Belgian second pillar market pension funds 25% 1,4 BN EUR 4,2 BN EUR group insurance 75% 11 Source: FSMA, 2011 Pension assets Group insurance: 46,4 Bn EUR Pension fund: 12,8 Bn EUR Insurance Br 21 Pension Funds 12 Source: Assuralia and BVPI 2012

7 Pension assets Group insurance Real certainty: rigorous legal prudential regime (financial and solvency requirements) controlled by the FSMA* Low volatility of returns Average over the last years 5 years 10 years 15 years 20 years group insurance 3,89% 4,20% 4,30% 4,41% 4,90% 5,80% Pension fund Less strict prudential regime than insurance companies Higher volatility of returns (volatility on 20 years = 11,45%) Average over the last years 5 years 10 years 15 years 20 years pension funds (nominal) -0,32% 8,09% 1,05% 3,33% 5,04% 3,06% 13 * Financial Services and Markets Authority Benefits Supplementary Pension Insurance: building up a supplementary pension upon the date of retirement and this in a fiscally advantageous way Defined Benefit Defined Contribution Cash Balance Life Insurance: in case of death, the benefit is paid to the beneficiaries Type of plans Company plan Early retirement plan Sector plan 14

8 Company plan Supplementary pension (or other covers) organised at the level of the company 76% of the companies have a plan on company level 70% of the employees, mostly white-collar workers, benefit from company-sponsored schemes Evolution number of affiliates 2 nd pillar Source: Assuralia, 2009 Sector plan Supplementary pension (or other covers) can be set up and organised at the level of the sector Sector plans are often set up for the blue-collar workers Insurance companies provide solutions for the sector plans (examples: transport, metal, chemistry, electricians, ) Number Number of of employees employees covered covered by a supplementary by a sector plan sectorpension 16

9 Legal Framework Law on Complementary Pensions (2003) Objectives Democratisation of 2nd pillar Company plans Sector plans Measures for promoting social protection Minimum guarantee on contributions for DC plans and vested rights for DB plans Enlarged and transparent information for affiliates Impact More than 50% of the second pillar pension plans have been set up after % of the companies without pension plan are thinking about underwriting a pension plan in the near future Cfr slides Pension Reform Tendencies 1. Increase of plans financed by employer premiums 40% 33% 33% 33% 37% This graph shows the situation for white collar workers. 30% 20% 10% 22% 20% 28% For management we observe a similar tendency. For blue collar workers the increase is even more extreme. 0% without employee contribution 18 Source: AON Hewitt Pension Survey 2010

10 Tendencies 2. Evolution towards DC Newly set-up plans are mainly DC Switch from existing Defined Benefits plans towards Defined Contribution 80% 70% 70% 71% 72% 65% 60% 50% 60% 53% 46% 53% 47% % 30% 33% 27% 40% 30% 29% % 10 % 0% 0% 0% 0% 0% 1% 2% 2% Defined Benefit Defined Contribution Cash balance 19 Source: AON Hewitt Pension Survey 2010 Tendencies 3. Increasing success of cafeteria plans Liberal HR-policy stimulates more and more employers to change to flexible cafeteria plans In 2010, 20% of the employers offer cafeteria plans to their employees Almost all cafeteria plans offer different choices for death coverage Only a small percentage of plans offer choices with reference to disability coverage However, in practice most employers limit the investment choices of their employees due to the required employer guarantee of 3,25%/3,75% Trends towards a decrease of the guaranteed interest offered by the Belgian insurance companies. 20 Source: AON Hewitt Pension Survey 2010

11 Fiscal Framework Contributions Social security contribution: 8,86% (cfr slides Pension Reform ) Tax: 4,40% Benefits Withholding tax: changes in taxation of benefits in order to encourage a longer career (cfr slides Pension Reform ) NIHDI* Contribution: 3,55% Solidarity Contribution: max. 2% (*) National Institute for Disability and Health Insurance 21 Pension Reform Dec 2011 June 2012: Belgium s new coalition government issued a series of proposals aimed to: Discourage retirement prior to age 65. Early Retirement age: progressively rise from 60 to 62 Bridge pension : less favourable conditions Taxation : higher taxation in case of Early Retirement Collect more taxes from retirement-plans Supplementary social security payment for higher pensions Externalization of internal Individual Pension Commitment 22

12 Pension Reform Early Retirement age: progressively from 60 to 62 Datum Minimum condition of length of career retirement age exception in case of long careers years old 35 years / ,5 years old 38 years years old 39 years ,5 years old 40 years years old 41 years 60 years old, if career of 41 years 60 years old, if career of 40 years 60 years old, if career of 41 years 60 years old, if career of 42 years 61 years old, if career of 41 years 23 Pension Reform Bridge Pension: less favourable conditions Renamed: Unemployment with Company Allowance Applicable at the earliest at 60 with 40 years of career (and not 25 years of career anymore) Exceptions : in respect of age and career length in case of collective agreement Transition period until

13 Pension Reform Benefits Withholding tax: changes in taxation of benefits in order to encourage a longer career Age of payment lump sum before 01/07/2013 Taxation rate from 01/07/2013 Early pension normal pension 60 years old 16,50% 20% 16,5 % 61 years old 16,50% 18% 16,5 % 62 up to 64 years old 16,50% 16,50% 16,5% 65 years old 10 % (if effectively active till legal pension age) / 10 % (if effectively active till legal pension age) 25 Pension Reform Contributions : Supplementary social security contribution for higher pensions: Base : 8,86 % on premium Period : if employer s annual contribution > eur extra social security contribution = 1,5% 26

14 1.3. The Third Pillar = The individual pension savings with tax benefits The Third Pillar Building up a complementary pension on individual basis in a fiscally advantageously way Pension Savings Insurance or financial institution Premium: max. 880 EUR in 2011 deductible from personal income tax Lump sum: tax of 16,5% on premiums paid before ,0% on premiums paid after 1993 Long Term Savings Premium: max EUR in 2011 deductible from personal income tax Lump sum: tax of 10,0% anticipation tax on the age of 65, if you start to save before the age of 55 10,0% tax on due date of the contract, if you start to save after the age of Source: Assuralia

15 2. Disability Disability Key Characteristics Employer 100% salary continuation for the first month of disability Social Security Reimbursements % of salary of Social Security Ceiling: EUR in 2012, whereas the salary of 30% of all Belgian employees exceeds this ceiling 70% 60% 60% 60% 60% 65% 55% (1) With dependent persons (2) Single without dependents (3) Married or cohabitant without dependents 50% 40% 40% 30% (1) (2) (3) (1) (2) (3) 20% 10% 0% 1st year (as from 2nd month) as from 2nd year 30

16 3. Disability Gap between salary and social security reimbursement Social RIZIV-tussenkomst security reimbursements voor een bediende, for a cohabitant samenwonend, white met collar worker een inkomen with a gross van 4310 salary EUR of bruto/maand 4450 EUR/month 4.450, , ,34% 42,8% 29,56% 28,6% 1.973, , , ,01 0 1st month 2nd to 12th month from 12th month 1st month 2nd - 12th month > 1 year High risk: significant loss of income need for extra coverage guaranteed income Disability Market environment Yet, many employees are not covered in case of disability x # insured % insured 9,43% 9,20% ,10% 10,30% 10,70% ,40% 11,50% 12,00% ,00% 8,00% 250 6,00% ,00% ,00% ,00% Source: Assuralia & NSSO,

17 3. Medical Medical Key Characteristics Legal Health Care insurance Increasing costs of medical expenses due to Ageing population New medical techniques Expected costs of ageing in % of GDP (Estimation of Federal Planning Bureau 2010) Health Expenses 8,1 8,9 9,8 11,7 3,6 34

18 3. Medical Private Health Care insurance Increasing success: already 8 million citizens are insured Number of people covered by a private insurer (x 1000) 33% has a complementary health a sickness fund Medical Number of insurance companies on the market decreases 36

19 3. Medical Legal framework Law Verwilghen for collective plans Insurance for Life : individual continuation The insurance company is obliged to provide the employer with information The employer is obliged to provide the employees with information about individual continuation The Law Verwilghen obliges the employer to transmit information to the employee regarding the possibility of prefunding. Prefinance = the possibility to pay a premium in order to avoid a premium increase upon continuation on a personal basis. Gender Law impact on hospitalisation Gender-neutral rate No longer specific waiting periods for pregnancy and confinement Medical Fiscal framework Changed fiscal treatment for ambulatory risks Old system System as from Jan Premiums deductible for employer Premiums not deductible for employer Reimbursement taxable for employee Reimbursement not taxable for employee 38

20 Questions? 39 Thank you for your attention! AG Insurance Mr. Hans Callebaut Deputy General Manager Major & International Accounts AG Employee Benefits T (32) (2) E hans.callebaut@aginsurance.be 40