Last call for the transitional measure "buying back study years"

A legal pension is calculated based on the number of career years you worked. Under certain conditions, you can have study years count as an equivalent period by buying back these study years. Until the end of November 2020, this is possible under favourable conditions. In concrete terms, you now pay an extra contribution per study year and later receive a higher pension. You can only buy back years within the social system in which you are active at the time of the buy-back.

In the article below, we focus on self-employed status.

Watch out with a full career!

Of course, buying back study years is only worthwhile for those who, at retirement, have not yet reached or will not reach a full professional career. A full career for non-civil servants is 45 years or 14.040 days. For younger people, it is therefore not always easy to already decide now to buy back study years.

Right to early retirement?

The bought-back study years do not count in the calculation for applying for possible early retirement.

Life Experts cannot assist with this; if you wish, you must request this calculation yourself via the website www.mypension.be.

You are not obliged to buy back all your study years. In addition, you can only buy back study years after your 20th, and (for those with multiple diplomas) only the years for one diploma:

- Every study year of higher education, including vocational, maritime and arts education - Also professional traineeship, but conditionally - Limited to the minimum number of study years needed to obtain the diploma. Too bad for those who repeated a year, or more - The preparatory years for a doctoral thesis count, but study years in preparation for a doctorate count for a maximum of 2 years

How much does it cost to buy back a study year under this transitional scheme?

Under the transitional scheme until 30/11/2020, anyone who graduated more than ten years ago gets the option to buy back study years at the flat rate of € 1.560,60 per study year.

The buy-back is tax deductible.

For the self-employed, the tax advantage runs parallel to that of the VAPZ (the free supplementary pension for the self-employed). The regularisation contribution is therefore a non-withheld social security contribution and tax deductible. Suppose you are in a marginal tax rate of 50% (+ 7% municipal tax), then you pay just over € 800 less personal income tax per bought-back study year. The payment is also deductible from taxable income, which means social contributions also fall, by approximately € 320 per bought-back study year. In the best case, one study year therefore costs you a one-off net amount of about € 400.

In the self-employed system, one year of regularisation yields € 277,44 gross per year if you will draw a pension at the single rate, and € 346,80 if you will receive a pension at the family rate. These amounts are indexed.

Watch out for the pension trap

Does this sound interesting to you? Do pay attention for a moment, though. Pension income is tax-free up to an amount of € 15.940 (figure for 2020) due to an increased deduction for income consisting purely of pension. If the taxable income of the person concerned is higher than that sum, tax is nevertheless due. Because of the tax brackets and the possible loss of the increased deduction, the notorious pension trap closes as soon as your income as a pensioner begins to rise above the ceiling. Anyone who will be paid out under a VAPZ contract or a RIZIV (the national health and disability insurance institute) contract may well be in for some surprises. Above their pension, that person is in fact also taxed on a so-called notional annuity. This increases the taxable pension income. As a result, in some cases the additional pension payout resulting from the buy-back of study years can be taxed at up to 49%.

Does buying back study years have an effect on the 80% rule?

It is not the case that a payment for buying back study years factors into the calculation for the 80% rule. If, sooner or later, the factor "estimated legal pension" in the calculation for the 80% rule is replaced by the estimate of the legal pension visible in myPension, and if that estimate also correctly takes the bought-back study years into account, then this could indeed have an influence on the 80% rule. But then perhaps more for the better than for the worse. This seems to us like far too many "ifs", and therefore not relevant for now.

A somewhat older audience, with an expected low pension, will be interested in buying back study years during this transitional period until the end of November 2020. The net premium they then pay per bought-back year is, in the best case, recouped after 1,5 years of pension. At least... if the pension trap does not close. After November 2020, the buy-back will be significantly less attractive.

For the younger generation, buying back study years is less attractive. The expense they would pay today per study year is relatively high given their age. And the right that results from it is somewhat less clear. After all, their career is still long, and life can take all kinds of turns. It seems to us that a supplementary pension plan, over which they have full control themselves through an insurer, is a better idea here.