Transitioning smoothly into retirement

While you can’t believe that retirement is starting to come into focus and that your retirement is getting closer, you know that you need to make sure that you’re doing everything right so that the transition into your next life phase is as smooth, and fun, as possible. This means making a few key decisions now to get your retirement finances in place.

Already picked your retirement date? Planning to take your group insurance proceeds or as a lump sum or annuity? Thinking about cutting back on your hours in the years leading up to retirement to see how you cope with an influx of leisure time? If so, you may already be considering options as part-time employment or a career break.

Read on and we’ll help you make your transition into retirement as smooth, and fun, as possible.
Your state pension
nearing retirement
Statutory retirement age in Belgium is currently 65, but will be raised to 67 as of 2030.

First things first: claiming your state pension

Claiming your state pension is very simple. If you retire at the statutory retirement age, you don't need to do anything. The National Pensions Office (NPO) will take all the necessary steps for you. The only exception is if you wish to draw on your state pension prior to reaching statutory retirement age, in which case you'd have to file a formal request. As long as you fulfil the age and qualifying years of service requirements, you may claim your benefits from your town tall, directly from the NPO or online at www.pensioenaanvraag.be up to one year before your chosen retirement date.

 

When will you be eligible for statutory retirement?

Statutory retirement age in Belgium is currently 65 (with exceptions for certain professional categories subject to other rules). The federal government has, however, recently decided to raise the retirement age to 66 as of 2025 and 67 as of 2030. Early retirement is still an option if you are at least 62 years old and have a minimum of 40 years of qualifying service. If you have had an exceptionally long careers, you will also be allowed to take (early) statutory retirement before the age of 62. A summary of the requirements for taking early retirement has been provided in the table below.


 

Year ​Minimum Age ​Years of service

​Exceptions for long careers

​ ​2016​62​40​At age 60 if career length = 42 years
​At age 61 if career length = 41 years
​ ​2017​ ​62.5​41​At age 60 if career length = 43 years
​At age 61 if career length = 42 years
​ ​2018​​63​41​At age 60 if career length = 43 years
​At age 61 if career length = 42 years
​ ​as of 2019​63​​42​At age 60 if career length = 44 years
​At age 60 if career length = 43 years
Your complementary pension: group insurance

What steps do you need to take to collect your group insurance proceeds?

Rest assured, it's virtually hassle-free. As is the case with your state pension, there's very little you have to do yourself. Just keep in mind that the procedure will differ depending on whether the payer is your past or present employer:

  • Your current employer will contact you a few months prior to your retirement date to go through the formalities with you. Your group insurance proceeds will be released to you when you retire, via your employer's pension institution.
  • To collect the group insurance entitlements you earned with previous employers, you simply contact the pension institution once you've retired. As of 2017, your pension institution will be notified directly of your retirement by the federal government.

 

When can you collect your group insurance proceeds?

As a general rule, you collect your complementary pension benefits when you retire, i.e. on your (early) statutory retirement date. In some cases, you will be allowed to draw on your group insurance proceeds earlier. To find out whether you qualify, it's best to check with your employer for the details about your personal situation.

 

Like many who are nearing retirement, you may be thinking about purchasing a second home. But did you know that you can apply your group insurance towards the purchase, construction or renovation of real estate (e.g. a holiday home) if authorised in your pension plan regulations? And if your group insurance plan also includes death benefit coverage, you can pledge that amount to complete your purchase or renovation. For more information about these (and other) options, see the 'I'm building a home' section.

 

Lump sum or annuity?

Your pension plan regulations stipulate how you can collect your complementary pension benefits: as a one-time cash lump-sum payout or as a regular annuity for the rest of your life.

  • Lump sum

    Taking the amount as a one-time lump-sum payout is by far the most common option in our country. You simply collect the entire cash lump sum on your retirement date, less any withholding tax (see below). Once you get your cash, you can do whatever you want with it, save it, spend it or even help out your children financially – it's up to you. And let's not forget the associated tax benefits and implications. Keep in mind, however, that a single lump-sum cashout does not come with any inflation or cost of living adjustments. If you were to live for another 25 years after your retirement, you'd lose purchasing power over time. Also, depending on how investment savvy you are, it may not be easy to wisely manage such a large sum yourself.

  • Annuity

    If you take your group insurance proceeds as a lifelong annuity payment, you essentially get an additional source of income on top of your state pension. Payment frequency can be monthly, quarterly, semi-annual or annual. With an annuity, you can factor in adjustments for variables such as inflation and cost of living, but in general it's assumed that you'd need to live for another 25 years of so after your retirement for this option to be a better bet than a one-time lump-sum payout.

One more thing: if your pension plan regulations require you to take a lump-sum payment, you can always convert this into an annuity at a later stage. This way, you still have the option to top up your state pension yourself.

nearing retirement
You collect your complementary pension benefits when you retire.
Tax implications for your group insurance proceeds
nearing retirement
If you’re planning on cutting back on your hours in the years leading up to retirement, make sure you’re aware of the consequences on your pension entitlements.

If your pension plan regulations allow you to take a cash lump sum payout, you'll be taxed on the total gross amount including profit sharing at the time of payment, less the applicable solidarity and INAMI/RIZIV contributions. On top of this, withholding tax will be levied on the gross proceeds excluding profit sharing and net of the solidarity and INAMI/RIZIV contributions.

If your pension plan regulations allow you to opt for annuity payments, then only your INAMI/RIZIV contribution will be deducted from the gross annuity amount. After this, withholding tax will be levied on the gross annuity net of the INAMI/RIZIV contribution and profit sharing. You will then pay tax on the annuity according to your tax bracket (the higher the amount, the higher the taxes).

There is also a third option: you take your benefits as a cash lump sum payout (in accordance with the pension plan regulations) but then convert this into a regular annuity payment yourself. Note that specific tax implications apply to this option as well.

For a complete overview of the tax implications, go to the section on "Tax implications for your group insurance proceeds".
 

Winding down your career

Retirement doesn't have to be an abrupt change from a full-time job to a life of leisure. Some people switch to part-time employment, take a career break or opt for early retirement. While these alternative paths into retirement are very popular, they do come with certain consequences for your statutory and complementary pension entitlements.

  • Your state pension is calculated based on qualifying years of service. If you voluntarily switch to a part-time job, you'll earn fewer credits towards your pension than with full-time work. In contrast, as a career break is paid by the ONEM/RVA, your time off will be weighted the same as if you were in full-time employment. For more information, go to the ONEM/RVA website.

  • There are also consequences for your complementary pension. Depending on the terms of your group insurance plan, the size of your retirement nest egg may be reduced and you may lose out on other covers such as Occupational Disability or Death-in-Service.

  • If you leave your employer under the terms of an unemployment scheme with company supplement (formerly known as a bridging pension) or early retirement, this will also impact the size of your pension.

 

As you can see from the examples above, the decision to cut back on your hours in the years leading up to retirement isn't something you should take lightly. Contact your HR department or the National Pensions Office beforehand to make sure you fully understand the consequences.

Advance planning for your post-retirement hospital coverage

When you retire, you'll not only be foregoing a monthly salary. It may also mean the end of your corporate-sponsored hospital plan, as many employees also have additional insurance coverage through their employer. But we can reassure you right away that you won't be left without a safety net. The legislation gives you the right to continue your corporate plan on an individual basis with the same, if not better, covers.

Your employer will inform you of the option to sign up for individual continuation coverage within 30 days of losing your corporate plan. You will then have another 30 days to apply for individual coverage. Make sure you apply by the deadline in order to keep the same covers.

From now on, you'll have to pay your hospital plan premiums yourself. Keep in mind that, most of the time, individual continuation coverage comes with a big hike in your premium, especially if you're over 65. You could, of course, go on your merry way without hospitalisation insurance, but this isn't something we can recommend in good conscience. This is because your medical expenses tend to rise significantly once you hit 65. All the more reason to sign up for hospitalisation insurance before you turn 65. You can always take out hospitalisation insurance later, via your Sickness Fund, but with less comprehensive coverage.

Questions? Concerns? Feel free to ask your HR department for assistance. You'll also find more information about individual continuation coverage on the AG Insurance retail website.

If your previous corporate-sponsored hospital plan was with AG Employee Benefits, you apply for continuation coverage by contacting continuation@aginsurance.be or filling out this form.

nearing retirement
You always have the option to continue your corporate hospital plan on an individual basis.