Pension savings returns: these choices give the maximum payout

What are the real benefits of pension savings? A question that isn't always easy to answer, but we’re going to try anyway. One thing is certain: if you start early enough, the return on your pension savings will be much higher than just the total of all your various deposits. Are you with us?

Various factors play an important role in deciding the final return on your pension savings:

• How long you have held your pension savings
• The monthly or annual sum that you deposit
• The return linked to your pension savings plan
• The frequency and regularity of your contributions
• The tax benefits that you receive

Make the most of the snowball effect

Does it matter when you start saving for your pension? Absolutely! The earlier you start, the more you will obviously be paid out at the end of the day. Of course, this amount is on top of your statutory pension, which currently averages between EUR 1,683 (for single individuals) and EUR 1,989 (for families).

What’s more, this is much more than a one-plus-one story. Every additional year that you add to your pension savings you receive interest on the existing interest. The result: the growth in the amount you have saved is not linear, but exponential.

Let’s explain this principle with a clear example. What is the potential return on your pension savings plan if you start saving on your 25th, 35th or 45th birthday and continue until you are 64?* And let's say a monthly deposit of EUR 85, which represents the maximum tax benefit of 30%?

• If you save from your 45th birthday to your 64th: you will receive between 26,000 and 42,000 euro
• If you save from your 35th birthday to your 64th: you will receive between 42,000 and 88,000 euro
• If you save from your 25th birthday to your 64th: you will receive between 61,000 and 170,000 euro

As you can see, for every extra ten years you save, your potential return increases many times over.

*The tax benefits relating to pension savings end the year you turn 64.

What does this return tell us?

In the examples above, there is a large range each time between the possible minimum and maximum returns. This is because the type of pension savings plan and its associated interest rate also play a major role.

Just like investors, you can choose between plans that involve more or less risk. If you opt for more risk, the returns can be very high. But if your chosen plan takes a dive, the final payout will drop back. However, if you opt for a pension savings plan with stronger guarantees, the returns will be less. But you gain in security.

Regularity pays off

In addition, it's a good idea to save regularly over the long term. If you save for a few years and then stop for a while: this does not have a positive impact on the returns on your pension savings.

The big advantage, however, is that you can decide how much you can put down monthly or annually. Pension savings are indeed a very flexible form of saving. Do you have a rather tough financial year ahead of you? If so, you can simply rein back your pension savings ambitions until you have a little more financial freedom.

Make full use of your tax benefit

Finally, there is an attractive tax margin attached to your pension savings, as we already mentioned in the sample calculation above. If you choose to save EUR 85 per month (or EUR 1 020 per year), you receive a maximum tax reduction of EUR 306 (or 30%) in return. An amount that you could, for example, reinvest wisely.

The tax ceiling for pension savings is a total saved amount of EUR 1,310 per year (or EUR 109.2 per month). In this case, the tax saving is 25%, or 327.5 euro.

Have we convinced you yet?

Until recently, were you mainly thinking of reasons not to start saving for your pension? Then we hope that we have been able to convince you that you should really start looking for your ideal pension savings plan.

Because no matter which way you look at things, it’s always worthwhile to start saving for your pension. The sooner you start with this good habit, the sooner it feels natural. And the more you benefit when your pension is actually just around the corner.

Find out about our pension savings plans now

What is the estimated future return on your pension savings? And what different savings plans can we offer you at Keytrade Bank? Dive right into our pension savings fact file for additional information.

Find out all about pension savings