The previously announced government measures to encourage people to work longer have recently been signed into law. The new regime relaxes the conditions on working while claiming a pension and also makes important changes to the existing system of pension bonuses.
1. Restrictions on earning income for pensioners over 65 who’ve worked for 42 years abolished.
No more limits on earned income as of 65
Pensioners as of 65 who’ve worked for at least 42 years can now combine their pension with a professional income without facing any income threshold limits.
Softened regulation and indexation of income limits before age 65
For pensioners younger than 65 or having worked for less than 42 years, new more flexible measures have been introduced:
- Yearlyindexation of income limits: Although the existing income limits will continue to exist, these limits will be indexed on an annual basis. The income limits for 2013 are determined as follows:
- The applicable deductions where these income limits are exceeded will be reduced. Indeed, if a pensioner exceeds the income limit as described above by 25% or less than 25%, their pension will only be reduced by the same percentage of the excess. If the pensioner exceeds the income limit by more than 25%, the pension will be suspended for the whole calendar year.
The new measures will take effect retroactively as from 1 January 2013. Please note that on an administrative level, simplifications are foreseen with respect to the declaration of professional income during retirement.
2. Pension Bonus
Recently, the Programme Act of 28 June 2013 changed the so called ‘pension bonus’ system.
Where a person is entitled to early retirement but keeps on working without drawing their pension, they will be entitled to a pension bonus as of the following year. This means that if someone is entitled to an early retirement pension as from age 62, they will begin to accrue a pension bonus as from the age of 63. Note that a person who does not fulfil the conditions of early retirement will no longer be entitled to a pension bonus.
The exact modalities and amounts still have to be determined by Royal Decree. However, the pension bonus will most likely be fixed at 1.5 EUR per day in the first year and 1.70 EUR in the second. Afterwards, the amount will be increased by 0.20 EUR each year, to a maximum of 2.5 EUR per day for a full day worked.
In contrast with the former regulation, the accrual of the pension bonus is unlimited in time (meaning even after age 65 one can still accrue a pension bonus), and only actually worked days are taken into account (removing the ‘assimilations’ criteria). The pension bonus will now be considered a personal right and will no longer be transferable to a surviving spouse.
The above implies that a person who meets the conditions of early retirement at the age of 62 but who decides to keep on working until the age of 65 will be entitled to a monthly pension bonus of 83 EUR. If the person decides to work until the age of 68, the pension bonus increases to approximately 247 EUR per month.
Finally, please note that all the benefits accrued under the old system will remain valid. The new pension bonus regime will take effect only as from 1 January 2014.