'Carrot and stick': Federal Government reaches deal on pension reform in Belgium

'Carrot and stick': Federal Government reaches deal on pension reform in Belgium
Prime Minister Alexander De Croo pictured during a press conference following the ministers council meeting. Credit: Belga/Hatim Kaghat

Following weeks of failed negotiations, senior ministers of the Federal Government were able to overcome their differences and find an agreement on Belgium's pension reform last night just after midnight.

After several tough negotiation rounds and a last long discussion between Prime Minister Alexander De Croo and a few members of the Francophone socialist PS party – which were not in favour of several previous versions of the agreement – the Federal Government's pension reform is now a fact.

"This pension package goes back to basics: ensuring that people who work longer also have more pension left over," said De Croo during a press conference on Tuesday morning. "In summary, this is a pension package that puts people to work."

He underlined that the current government took the decision to raise the minimum pension substantially, to €1,500 at the start of its term. "However, it is only natural that there should be something in return," De Croo.

Translation of tweet: "Agreement! Working effectively for a higher pension: 1) Higher pension for those who continue to work after the age of early retirement, 2) Employment condition of 20 years for access to minimum pension for the first time, 3) Those who combine part-time work and family receive a higher pension."

According to the agreement, people must have worked for at least 20 years for at least four-fifths (working at least four in five days of the work week) to be entitled to a minimum pension – coming down to years of 250 working days. As those 20 years are calculated in days, that comes down to 5,000 working days.

However, there is a broad transitional period to take into account the rights that were already acquired: the threshold of 5,000 days worked to be entitled to a minimum pension will apply from 1 January 2024 to everyone aged 53 and under. For those aged between 54 and 60, the requirements for the effective number of days worked are lower.

Related News

Additionally, anyone who has been declared 'unfit for work' due to an illness or a disability for more than five years must also have worked for less than 20 years to be entitled to the minimum pension. Maternity leave, breastfeeding leave and palliative care leave will also be considered actual work from now on.

The pension bonus – which was abolished by the previous government – will also return: it will amount to €2 to €3 per day for those who do not go into early retirement. That way, it should be possible to get an extra net pension of between €300 and €500 a year, for a maximum of three years.

"You could say that this pension package is actually one of carrot and stick," De Croo said. "The carrot means that those who choose to work longer also build up a proportionally higher pension. The stick means that there is a stricter entry to the minimum pension. So, for the first time, there is an effective working condition for access to the minimum pension."

Lastly, the pensions of those who have worked part-time before 2001, for example, to look after the children, will also increase. "In this period and under those regulations, it was mainly women who made this choice, and so we are now attempting to correct that," De Croo said.

How did the minimum pension work until now?

In the agreement from two years ago of the Federal Government's coalition, it was agreed to raise the minimum pension "towards €1,500 net" – but that was only possible after a full career of 45 years.

For those who had an "incomplete career," the amount decreased proportionally to the number of years they had worked fewer. In practice, this meant that people who had 'only' worked for 30 years, were only entitled to 2/3 of that amount.

Currently, the minimum pension after a full career for employees is €1,504, the cabinet of Federal Pensions Minister Karine Lalieux told VRT. Net (without the withholding tax on professional income), this amounts to €1,423.

Due to the annual increase in minimum pensions, upcoming adjustments to prosperity and indexation, the net minimum pension could already exceed €1,500 next year. By January 2024, when the pension reform takes effect, it will even be €1,628.

Latest News

Copyright © 2021 The Brussels Times. All Rights Reserved.