AG's benchmark study on supplementary pensions

July 2023

On April 20, 2023, AG presented their “Benchmark Study on Supplementary Pensions” with captivating speakers and surprising content.

Benoit Halbart, Managing Director of Employee Benefits & Health Care at AG, explained the importance and challenges of pension issues. According to a study performed by Ipsos on behalf of Assuralia in 2021¹, the need to build up a supplementary pension is well understood: 75% of people are convinced of this and 80% believe that the employer should contribute to it. The federal government wants every worker to be able to build up a supplementary pension with a contribution of at least 3% of their gross annual salary to enjoy a high enough replacement income later on.

“In terms of the working population, there is already more balance between men and women, but in terms of supplementary pensions we see that the balance is still tipping towards men.” – Mabelien Coppens, Legal advisor at the FSMA, Financial Services and Markets Authority

According to the FSMA's annual sector report, on January 1, 2022, nearly 4.2 million people in Belgium were affiliated with a supplementary pension plan, with more than 100 billion euros of vested pension reserves already built up. However, one-third of the active working population is not actively affiliated with a pension plan. Thus, there is still a long way to go.

Moreover, it is important to consider the following: the higher the salary, the lower the replacement income through the statutory pension will be in proportion. This is because the salary taken into account when calculating the pension is capped. Thus, for an employee with an annual salary between EUR 75,000 and EUR 100,000, the statutory pension will cover only 29% of the replacement income, and the supplementary pension 16%. In total, the replacement income is then only 45%. And that is far from the comfortable 70% replacement ratio put forward by Pierre Devolder (Finance Professor at UC Louvain). To get to that 70%, he says, we would have to go to a contribution rate of 7.5%, instead of the projected 3%.

As the market leader in supplementary pensions in Belgium, AG analyzed the contracts of 316,826 affiliates of 5,374 corporate clients. Across the entire AG portfolio of corporate pension plans, excluding sector plans, the average contribution rate is 4.5% (EUR 2,874 per annum) and the median contribution rate is 3.70% (EUR 1,675 pe annum). Nevertheless, no less than 39% of the affiliates do not reach the target of 3%. There are also major differences between the 18 sectors covered in the study.

And that is not all. The study also shows that there are significant differences between the 'Defined Contribution' plans, with fixed premiums per month, and the 'Defined Benefit' plans, with a fixed payment at the end of the contract.

“Is it normal that we continue to spend a lot of money on car budgets while setting aside very little for a retirement plan, which we still consider a luxury?” – Pierre Devolder, Finance Professor at UC Louvain

There are not only differences between the 18 sectors studied, but AG’s benchmark study also showed different numbers within each sector. Are you curious about where you stand compared to your peers? Do you want to know whether your pension plan is sufficient to offer your employees a comfortable replacement income later on?

Get the Whitepaper with all the striking findings of AG’s unique benchmark study on the second pension pillar in Belgium