When can I withdraw my IPT at the favourable rate of 10%?

Legal pension in a nutshell.

There is a difference between the legal retirement age and the date on which someone can, at the earliest, take up their legal pension (the so-called P-date). In myPension you will find these two dates for your personal situation. Here you will find a handy step-by-step plan for how to retrieve this information from myPension.

The legal retirement age is the same for everyone in a given calendar year. In 2021, for example, the legal retirement age is 65. That means: if you turn 65 in 2021, you have reached the legal retirement age. This legal retirement age will be raised to 66 from 2025 and to 67 from 2030. This gives the following table:

But... there is a second rule. You can also apply for early retirement. This means you can apply for your pension earlier than the legal retirement age. So you might already be able to apply for your pension in 2021, even if you have not yet reached the age of 65. This is because you have enough career years on the counter. This year, for example, you can take early retirement from age 63 if you have a career of 42 years. And anyone with an extra long career can retire even earlier.

- Regularised study periods (see here) do not count towards the career requirement, but do count towards the calculation of your pension amount. - Remember above all that taking early retirement means you are effectively taking up your legal pension. Just at an earlier date than the legal retirement age. There is often confusion about this.

So what about the supplementary pension in your IPT (an individual pension commitment funded by your company), when is this paid out?

You have taken out a policy with a specific end date. That end date is generally 60, 65 or 67 years. Does this mean your pension capital is paid out at that age? Well, no. Not necessarily. The golden rule is that your supplementary pension must be paid out at the moment you take up your legal pension. The insurer is automatically notified of the fact that you have taken up your (early) pension via Sigedis (the second pillar database), and will send you a letter with instructions for settling your insurance contract.

- Example 1. Suppose you take early retirement at 63 and you had a financially attractive insurance contract running until 65 (for example at an interest rate of 3,25%). And you would have liked to let this contract keep earning interest for another 2 years. That is not possible. This contract is inexorably settled in your 63rd year. - Example 2. Same situation. Now suppose you invested your IPT in a Branch 23 fund. You notice that this fund is performing excellently. As a result, you would like to remain invested for at least another 2 years to keep following the upward trend. Or, worst case, suppose the fund has performed very poorly, so you want to wait a while before settling, so that a possible recovery can follow. Well... even then these pension contracts are settled. See also tip 2 below. - Example 3. The reverse also applies. Suppose you have an IPT contract that matures at age 60, and you had hoped to use the paid-out sum for a particular expense at 60. Know then that this contract will only be paid out, at the earliest, following your legal pension... and that is certainly no longer at your 60th. In most cases your contract will be automatically extended by the insurer until your legal retirement age (see above). And it will then be paid out from the moment you apply for your (early) pension.

- there is an exception rule for those born in 1961 at the latest. Our experts can provide more explanation on this where applicable - for IPTs invested in Branch 23, we advise our clients on a so-called "soft landing" from age 54-58. - This means that the Branch 23 investment mix should preferably become more defensive from that age onwards, or even be moved wholly or partly to the risk-free Branch 21. This way you avoid your contract being paid out just at the moment of a sharp fall in the value of the underlying fund investment. - But it could also be different. Only a minority of policyholders actually need their full pension capital at exactly the moment of retirement age. In the majority of cases, this capital serves to maintain the standard of living in the years that follow. Focusing on retirement age as the investment horizon (with the soft landing as a result) is not always in the interest of the beneficiary. That is why we have for years been urging our insurers to develop products or procedures that make it possible, after payout of the IPT capital and after deduction of the second pillar taxation, to achieve a "seamless reinvestment" from the second pillar into the fourth pillar. In plain language: the investment simply continues, but now in a private policy. In this case the investment horizon is no longer the (uncertain) retirement age, and a "soft landing" becomes unnecessary. This would be a good deal more logical in the overall approach to the client, and certainly in the context of preserving comfort of living at a later age. We hope to be able to give favourable news on this shortly.

How is my supplementary pension in IPT taxed, then?

The capital of your IPT is, after deduction of the solidarity contribution and special social contributions (together max. 5,55%), taxed at a rate that depends on your age at the time of payout, or whether you have a full career:

Should you doubt this: this is a very favourable taxation. Read more about it here.

If you cannot show a full career, then due to the extension of the retirement age, the lower rate will only be possible from your 66th if you were born after 31.12.1959, but before 01.01.1964, and from your 67th if you were born after 31.12.1963.

Staying active is sometimes the message.

In Belgium we have a right to a pension, not an obligation to take a pension. If you meet the conditions to take (early) retirement, you do not have to retire. No. You may retire. And you must actually apply for your legal pension, it is not granted to you automatically. So you may choose whether or not to apply for your (early) pension at a particular moment. The choice of that moment can sometimes be financially rewarding.

Knowing that a drop in the taxation of the final capital in your IPT of 6.5% (16.5% vs 10%) is fairly substantial, it can pay off as a self-employed person to delay applying for your legal pension, and to remain active. Especially if you have built up significant capital in the second pillar, where with a small extra effort you could meet the conditions to have your capital taxed at 10% instead of 16,5%. It is also useful to know that as a self-employed person it is sufficient to have been continuously affiliated with a social insurance fund for three years before the legal retirement age, and to have paid your social contributions for a primary occupation during that period.

If you have further questions about this or would like advice, our advisors are available to help.