What is Group Insurance?
Among life insurance policies in Belgium, group insurance is a second pillar pension policy aimed at company employees. Group insurance is taken out by the employer on behalf of its employees in order to save for their supplementary pension. All employees are therefore eligible. It has three main purposes:
- Accumulate capital for employees' retirement.
- Protecting the families and heirs of employees.
- Save for the long term and enjoy tax benefits
What does group insurance cover?
The employer sets aside an amount each year for the employee. This amount may be a percentage of the salary or a lump sum. Year after year, these amounts or bonuses accumulate in a retirement fund that will later be paid to the affiliated employee.
Why choose group insurance?
Group insurance is not only beneficial for employees. It also offers a number of advantages for employers.
Employee
- Supplementary pension scheme. The statutory pension is not sufficient to maintain your current standard of living. It is therefore strongly recommended that you set up a supplementary pension scheme.
- Supplementary cover. In addition to supplementary pension, there is often a number of important additional types of cover available.
- death cover paid to the legal heirs or to a chosen person (e.g. partner). This beneficiary may change during the term of the group insurance policy.
- interest in the event of incapacity for work
- orphan benefits if there are dependent children
- Tax advantage. Under the current tax regime, the extra-legal pension you receive through group insurance is taxed at a significantly lower rate than your normal salary.
Employer
- Remuneration benefit. A comprehensive group insurance policy can be an asset in attracting talented new employees.
- Tax benefit As an employer, you can deduct group insurance premiums as business expenses.
- Attractive reward. An equivalent increase in the group insurance premium gives the employee a higher net gain than an increase in gross salary.
How do I take out group insurance?
Your employer can only include group insurance as an extra-legal benefit in your remuneration. In some sectors, group insurance is compulsory, but in most cases, it is the employer who chooses to take out group insurance.
What is the return on group insurance?
In the case of group insurance, the Supplementary Pensions Legislation requires a minimum return set each year by the FSMA (Financial Services and Markets Authority).
If the insurance contract generates a lower return (underfunding situation), the employer must cover the shortfall in returns.
What happens if I change employers?
Lorsque vous démissionnez ou êtes licencié, il y a deux possibilités :
- You can leave the capital accumulated with your current insurer. In this case, no further payments will be made to the insurance company, but you will continue to receive the return or capital gains on the capital already paid in.
- If your new employer also offers group insurance, you can also transfer your accumulated reserve to the new group insurance plan (at no cost and without tax).
When will I receive the money from my group insurance?
Group insurance is automatically paid when you take (early) retirement. You cannot therefore withdraw the money before retirement.
There are a few exceptions to this rule.
The most important and common exception to this rule is as follows: when you have reached the legal retirement age but are not yet retiring and continue to work for several years, you can already receive your supplementary pension payments.
Like all taxable life insurance policies, group insurance is taxed upon withdrawal. This means that when you receive your capital, it is subject to:
- A National Health Insurance Fund (INAMI) contribution of 3.5% of gross capital.
- A solidarity contribution of up to 2%.
- A withholding tax of 10% to 20% (the latter depending on the length of the professional career and the age of the insured person at the time of collection)
*Rates applicable to the calculation of the minimum guaranteed return referred to in section 24 of the PCA.
Pursuant to Article 24, § 3, of the Law of 28 April 2003 on supplementary pensions and their tax regime and certain supplementary social security benefits, the FSMA has calculated and published annually since 2016 the rate applicable to the calculation of the minimum guaranteed return.
The individual pension commitment (IPC)
An individual pension commitment (IPC) is a commitment to supplementary pension to an existing group insurance policy. It is proposed, in a manner occasional and non-systematic by an employer to a specifically designated employee (regardless of the category of staff to which they belong).
The employer may only offer an individual pension commitment if a collective pension commitment applies to all employees in their company.