EIP - PLCI - CPTI
The individual pension commitment (IPC)
The EIP is a pension savings scheme for company directors, an extra-legal benefit that you can tailor to your needs and circumstances, as it offers a high degree of flexibility. The company makes monthly, quarterly, half-yearly or annual payments. Some insurers also provide a supplement in the form of profit sharing.
You can choose between two options for individual board.
Branch 21: safety first.
You can opt for Branch 21, in which your money is saved. This is the “safe” option, as your return does not depend on the market. It is determined in advance. Your insurer will set a fixed annual interest rate for each payment. In addition, your insurer may also grant a profit share as a supplement. However, this profit share depends on your insurer's profits and is independent of your fixed return. Your money is completely safe and you cannot end up with less money than you started with, but your return is on average much lower. You will also earn significantly less at the end of the day.
Branch 21 is a good option if you are not far from retirement. If the market suddenly takes a downturn, you do not have to worry about your money. After all, you do not have much time to make up for any losses.
Branch 23: a more dynamic investment
The money that the company pays for your EIP is invested in Branch 23. This involves a little more risk, as you have no guarantee that the market will perform better. However, your money can often yield much more in the end, as interest rates on safe options are very low.
Branch 23 is the ideal option if you start early.. You still have plenty of time to offset market fluctuations and make the most of your money. Traditional savings are becoming less and less profitable. If you are more than 10 years away from retirement, you will probably get more out of your money this way.
Tax benefits of the Individual Pension Commitment (IPC)?
You can benefit from several attractive tax advantages thanks to the EIP.
Reduction in social security contributions.
The company pays for your EIP. You can therefore deduct it as a business expense. To do so, you must comply with the 80% rule. This rule gives you a maximum amount that you can save and declare as a business expense. Your statutory pension and the capital of your supplementary pension, such as your EIP, cannot exceed 80% of your normal gross salary for the past year. Your gross salary includes your regular monthly remuneration, but also benefits of any kind, such as your company car, etc.
By deducting the payments as a business expense, your taxable salary will be lower. You will therefore pay less in social security contributions.
Low tax rate on payments.
You pay a tax of 4.40% on the premium, but you will still have more net income from the payments that the company makes for your EIP than, for example, with a salary increase. The payments are taxed more favourably and are therefore an ideal supplement. The Individual Commitment Pension is beneficial for you and your business.
Favourable final tax rate.
If you withdraw the capital at age 65, the total amount will be taxed at 10%, plus municipal tax (provided you have remained “active” until that age). Profit sharing is not included.
You pay an INAMI contribution of 3.55% on the total capital and profit sharing. Your solidarity contribution can range from 0% to 2%. The amount of your solidarity contribution deduction depends on the capital you have saved.
| Pension fund | Solidarity contribution |
| Less than EUR 2,478.95 | 0 % |
| From 2,478.95 EUR to 24,789.34 EUR | 1 % |
| Over 24,789.34 EUR | 2 % |
If you wish to withdraw the amount earlier (provided that the law allows you to do so), for example at the age of 60, you will pay 20% tax on the capital. This percentage decreases with age.
Can I combine my Individual Pension Commitment (IPC) with other pension savings schemes?
You can take out an Individual Pension Commitment in addition to your supplementary pension scheme (PLCi)This way, you can enjoy the tax benefits of both and save a considerable amount for your future.
However, taking out a PLCi contract has a negative impact on the tax advantages of an EIP contract.
Why is the Individual Pension Commitment (EIP) attractive for self-employed persons?
As we also mentioned above, your final capital is taxed at a favourable rate and you pay lower social security contributions for years, leaving you with more net income. But the EIP offers other advantages too.
Additional protection
The amount you save belongs to you. No claims can be made on the amount saved in the event of bankruptcy. The scheme therefore offers you a high level of security.
You can take advantage of a policy loan.
Are you looking to build or renovate? Do you just need some extra capital? Perfect. You can request an advance from your EIP to finance your renovations. In other words, you can use the money you save flexibly. Your pension plan is effectively used as collateral.
The interest rate you use for this depends on the company with which the contract is taken out, and you only pay small management fees. The costs you incur for a mortgage and registration fees are much higher.
Back service & catch-up
The back service allows for compensation for insufficient contributions during the employee's career with the company, taking into account changes in remuneration. Article 35 of the Royal Decree/CIR 1992 does not impose any limit on the number of years that can be taken into account in this context.
This can be combined with catching up.This allows for the recognition of up to 10 years of prior service outside the company.
Supplementary insurance
You can also take out disability and death cover with your EIP. In most cases, the current allowance you receive in the event of disability is barely enough to cover basic needs, let alone invest. This insurance will then use part of your savings to pay you this cover.
The Supplementary Pension Scheme for the Self-Employed (PLCI)
Ordinary PLCI
A supplementary pension scheme for the self-employed allows you to pay less tax and social security contributions. With a standard supplementary pension scheme, you can pay up to 8.17% of your professional income from three years ago as a premium. Several additional types of cover are also available.
Social PLCI
You can also opt for a ‘social PLCI’. The solidarity component is set out in a solidarity regulation. You then benefit from several additional guarantees, such as cover for incapacity for work and death. A ‘premium waiver’ guarantee, under which the insurer pays your PLCI premiums if you are unable to work, is also possible.
The premium ceiling for a social PLCI is higher than for a standard PLCI and corresponds to 9.40% of your professional income from three years ago.
Please note that absolute maximums are also provided for social PLCI.
Minimum premium
A minimum premium also applies: this amounts to €100 for a standard PLCI and €111.12 for a social PLCI.
Yield
A PLCI usually comes with a guaranteed return (branch 21), possibly supplemented by profit sharing. Some insurers offer the option of investing the profit sharing in a branch 23, where the return depends on the performance of one or more underlying funds. Premiums for a PLCI are not subject to the 4.4% tax.
PLCI Inami for (para)medical professionals
Doctors, dentists, pharmacists, and physical therapists can, in exchange for signing an agreement, receive a subsidy to invest in a social PLCI (also known as an INAMI contract). The exact amount of the subsidy varies depending on the profession and the level of agreement (total or partial).
The Pension Agreement for Self-Employed Workers (CPTI)
Since mid-2018, self-employed individuals without a company can sign up for a Pension Agreement for Self-Employed Workers (CPTI) in order to build up a supplementary pension.
The context
It is well known that all self-employed workers have every interest in saving to build up a supplementary pension. The average statutory pension for a self-employed person is significantly lower than that of an employee.
Self-employed individuals who work for a company can build up a supplementary pension through a supplementary pension scheme for the self-employed (PLCI) and an individual pension commitment (EIP). Those who do not work for a company cannot take out an EIP. For a long time, apart from pension savings and traditional long-term savings, the only option available to them was the PLCI.
In addition, the maximum contribution for a PLCI is limited to 8.17% (standard PLCI) or 9.40% (social PLCI) of the reference income, with low absolute maximums in this case as well. In order to stimulate supplementary occupational pensions, our politicians felt that an additional vehicle for self-employed persons without a company was needed. This led to the creation of the CPTI, which remains exclusively reserved for self-employed persons without a company. Under certain conditions, self-employed persons in complementary activities and assisting spouses may also take out a CPTI.
Tax benefit
Payments into a CPTI will entitle you to a tax benefit of 30% (+ municipal tax). However, a tax of 4.4% will have to be paid on the insurance premium. The maximum amount that a self-employed person can pay into the CPTI each year is limited by the 80% rule. This is calculated on the basis of the average income over the past three years and therefore differs from the method used to calculate the 80% rule for individual pension commitments (EIP).
Payment
The capital saved may be paid out at the earliest when the self-employed person takes their statutory pension or becomes eligible for a statutory (early) pension. The payment will be taxed at 10% (+ municipal taxes) and through a solidarity and disability contribution. This also applies in the event of death.
BRANCH 23
A PLCI invests solely in branch 21, meaning that the customer benefits from a guaranteed return. Investing in branch 23, where the return depends on the performance of one or more underlying funds, is not possible with a PLCI. With a CPTI, it will be possible to invest in both branch 21 and branch 23. This means that self-employed individuals can hope for a better return in these times of extremely low interest rates.
BACKSERVICE
As with an EIP, it is possible to make a back service payment for a CPTI. This is a catch-up payment that will use a tax deduction option that was not used in the past. It is possible to go back up to 10 years from the date of subscription to the CPTI. However, the retroactive period is limited to January 1, 2018, which means that the possibility of using back service will be rather limited for the first few years to come.
Quercus Risk & Capital supports you in setting up your extra-legal pension plans and ensures not only that they are in line with your objectives, but also that they strictly comply with current tax legislation.