Pension savings: tax relief as an extra benefit

Pension savings may seem like something to think about in the distant future, especially at a young age. But did you know that in Belgium, pension savings offer financial benefits right now in addition to being a smart investment for the future? Pension savings are your perfect opportunity to receive tax relief that you can use to build your pension pot even more quickly. How does it work exactly? Find out more here.

A long-term investment…

Life doesn't stop in your sixties – on the contrary, in fact! This is when you can truly enjoy a life of leisure, and deservedly so after many years of hard work. And you can hopefully also take advantage of the nest egg you have built up during your career.

Thanks to your pension savings, for example. Pension savings are a safe, accessible way to put money aside for the future. By depositing an agreed amount monthly or annually, you can build up a nice lump sum that you can use after your professional career ends.

This amount will keep on increasing depending on the rate of return of your pension savings plan. Did you know you will also build an extra return on top of your previous return as each year goes by? This principle of

...and you will benefit in several ways

The Belgian government encourages pension savings through tax relief. This makes the system even more appealing to you.

Specifically, pension savings entitle you to significant tax relief. You can choose from two scenarios:

• You save up to 1,020 euros per year and are entitled to 30% in tax relief.
• You save up to 1,310 euros per year and are entitled to 25% in tax relief.

In practice, this means that in the first scenario you get 306 euros back each year through your personal income taxes. In the second scenario, your tax relief is 327.50 euros.

Do note, though, that if you want to save between 1,020 and 1,310 euros, you should invest at least 1,224 euros per year in your pension savings plan. If you don't do this, you risk getting less tax relief than if you paid in less. That would be a missed opportunity in front of an open goal.

What to do with your pension savings tax relief

Each year, you receive around 300 euros in tax relief. Over a period of 40 years, this amounts to more than 12,000 euros. The question is: what will you do with it?

If you are taxed as a couple and you each have your own pension savings plan, both of you will be entitled to this maximum tax relief and you will benefit twice as much.

Tax relief limited to your 65th birthday

If you started saving for your pension before the age of 55, you will pay a one-off final tax of 8% on your saved capital at the age of 60. It is up to you to decide whether you want to continue your pension savings afterwards.

This is certainly recommended if your financial situation allows it, because you can still save with tax relief through to the year in which you turn 64. In other words, you are entitled to pension savings tax relief for a number of years after your final tax without paying any further taxes on it.

If you decide to start your pension savings at a later age, please note that your pension savings must cover a period of at least 10 years. If you start saving at age 60, for example, you will have to continue your savings at least until you are 70, and you will not receive any tax relief on this during the last 6 years.

You will also be charged a final tax of 8% at the end before you can actually collect your savings. Once again, the golden rule is: the sooner you start saving for your pension, the more you will receive in the end.

Let’s get the most out of your pension savings

Tax relief is just one of the various financial benefits offered by your pension savings. At Keytrade Bank, we don't waste any time: we simply make things happen.

Read more about pension savings