Tax deductible pension savings plans

The pension savings plans allow you to compensate fully or partially (depending on the amount paid in) the gap between your last salary and the (lower) pension received. In addition, during the savings accumulation phase, you can deduct the premiums paid into the pension savings plan up to an annual limit of € 3,200.

These savings plans are contracted by an insurance company in connection with a bank where the saved money is invested. Most pension savings plans offer different possibilities on how the savings are invested. The classic option offers a conservative interest based approach; the dynamic product offers the possibility to invest partially into investment funds for expected higher returns. The allocation between cash, bonds and shares within the investment funds depends on your investment strategy and the legal framework: the older you become the smaller the percentage of securities in your pension scheme can be.

Arrived at maturity (usually at retirement age) the pension savings plan will start paying out benefits. The payout is possible as a combination of the following two options: your can have the benefits of your pension savings plan paid out as a monthly payment which will run until death; or as a single one shot payment (the one shot payment can constitute maximum 50% of the contracted pension amount). And in case there are still funds in the scheme at the moment of death, the rest of the saved amount will be paid out to the beneficiaries stipulated in the contract (spouse, children, grandchildren…).

Tip: Given the uncertainties around the future of pensions in Europe, this savings product should be high on your priority list!

Given the evolution of both life expectancy after retirement and the ratio between the active and inactive population, it is important to think now about organising your retirement with this type of product.

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