What supplementary pensions are there for the self-employed?

Dirk Saman   |  

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Dirk Saman

Dirk is accountant, adviseur en partner van BOFIDI Antwerpen.

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Of those who are self-employed in their main profession, 34% have a Free Supplementary Pension for the Self-Employed (FSPSE) and 19% have an Individual Pension Commitment (IPC), according to the biennial report of the FSMA (2018), the supervisory body for the Belgian financial sector. These figures are rather low. So, it’s time to take a closer look at the possibilities for your company.

Pension savings

The simplest way to save for later is pension saving. This means that you build up a supplementary pension on top of your legal pension. Almost all banks and insurance companies offer pension saving. There are two ways to do that: a pension savings fund and a pension savings insurance.

Let’s look at what pension saving means for assessment year 2021. There are two possibilities, either you save 990 euros, which gives you a 30% tax exemption, or you save 1270 euros, which gives a 25% tax exemption.

On your sixtieth birthday you pay a one-time final tax of 8%. If you continue to save after your sixtieth birthday, you will still be entitled to a tax deduction and the final tax will be dropped. How much it would be best to save now varies, as does which final taxation applies, so be sure to get in touch with your bank or insurance broker.

Bear in mind, the 25% is only more advantageous if you deposit more than 1188 euros (assessment year 2021).

Free Supplementary Pension for the Self-Employed (FSPSE)

The FSPSE or Free Supplementary Pension for the Self-Employed is very interesting. It gives all self-employed people the opportunity to build up a pension in a tax-friendly manner.

The premiums of an FSPSE can be deducted from your personal income tax as a social security contribution. This means not only that you pay less personal tax, but also that the calculation basis of your social security contributions is lower. Depending on your situation the premiums may provide a tax advantage of 60 to 65%.

To be able to deduct the FSPSE premiums for tax purposes, the statutory social security contributions must be paid on time. Only premiums paid during the income year are tax deductible and a certificate must be submitted.

If you postponed your social security contributions in 2020 because of COVID-19, the FSPSE premiums will remain tax deductible due to a one-off tolerance by the tax authorities.

Individual Pension Commitment (IPC)

An Individual Pension Commitment (IPC) is an individual life insurance with a company manager as the insured party and beneficiary. For the policy holder, i.e. the company, the contributions are 100% deductible as costs, as long as the 80% rule is met. This rule states that the statutory pension and the extra statutory pension together may not exceed 80% of the normal gross remuneration of the last year.

If you have not paid any IPC premiums in the past, you can still catch up the unpaid premiums for the past ten years retroactively. It is best to check this optimisation annually with your BOFIDI accountant and your insurance broker.

In the best circumstances, the distribution of the pension capital is taxed at 10%. Other rates apply if you want an earlier pay-out.

Good to know: when buying a property in Belgium or abroad you can, under certain conditions, use part of the pension capital you have already built up to take out a mortgage with tax deduction.

BOFIDI gets the best out of you and your company

If you have a specific question about your pension and would you like to ask one of our advisors about it, please send us a message. We will be pleased to plan a meeting, online or offline.