Has anyone else followed Bacquelaine's plans to buy into the Belgian pension system? In short, between 2017 en 2020 you get an opportunity to buy extra years of pension at a bargain. At the moment, people in the private sector can't use their the years they spent in college towards their pension which means they start later to get their full pension at 45 years worked. For government employees, the time in college is automatically covered, meaning they don't have to work that long to enjoy the full pension benefits.
The current plan -which already has been voted on but has to be put into law- is to offer people a grace period between 2017 and 2020 during which they can buy into the system for the time they spent studying (diploma-bonificatie in Dutch). The cost would be 1350 euros per year, at a maximum of 4 years. For each year invested, you would get 250 euros a year once you retire, 1000 euros a year if you do the full thing. With the payments being partially tax deductible, you'd only have to enjoy a few years of pension to have your investment pay itself back. With some play money now, you could gain yourself a nice holiday every year.
I'm not sure whether I would qualify - I have been living in Belgium for a long time, also studied there some time, then spent a number of years abroad and now I work in the Netherlands, even though I moved back to Belgium a number of years ago.
The only question is if the government will have enough money to pay these pensions in the future. And I'm not sure whether the pensions in Belgium are inflationproof.
Any thoughts on this? It seems to me like a good investment, if you can make the payment.
I only realized that this post was from 2016 when I finished my own investigation. But maybe it still has value to other readers.
In my case, I'm better of just investing that money in index funds.
Index fund investing- Initial cost for 4 years: 5200 (I think it's even 1500 a year, but let's assume 1300 a year)
- Yearly market gain: 5% (conservative)
- I still need to work at least 31year
- End balance of invested 5200 euro = 23597 euro
Index investing assuming that you can get a max tax deduction of the money you invested- Normally you pay 5200
- Assuming you are in the highest tax bracket: 5200 x (13,07%+50%) = 3279 euro you do not have to pay in taxes and get back
- So your actual cost is only 1920 euro
- Initial cost for 4 years: 1920
- Yearly market gain: 5%
- I still need to work at least 31year
- End balance of invested 1900 = 8714 euro
Simulation on mypension.be- Extra monthly money: 51,88 euro (netto)
- Yearly: 622,56 euro
- Average age men in Belgium = 79 year
- Enjoying retirement: 79 year- 65 retirement age = 14 years
- 14 x 622,56 = 8716 euro benefit
So to summarize: I gain a whopping 2 euro if I buy my college years. However, to get this 2 euro profit, I need to invest 1,9k euro for 30 years in a government with always changing rules. Examples of changing rules: adding taxes for solar panels, cancelling complete "Home tax credit system" in 3 months time, adding a "rich" tax if you have more then 500k, etc...
Q&A"Yeah but you might live longer". Yes. But I might also die sooner. Then I lose out even more.
"Yeah but you might get worse returns then 5%". Yes. But they might also be higher. Historical market returns are 8%.
