All articles · 2025-04-11 · Pension

What is a group insurance plan?

A group insurance plan is a supplementary pension plan taken out by an employer for the benefit of their employees.

By Jan Hermans, CEO & founder of Lyff.

What is a group insurance plan?

A group insurance plan is a supplementary pension plan taken out by an employer for the benefit of their employees. It is one of the most common forms of second pillar pension in Belgium. Approximately 70% of Belgian salaried employees receive a group insurance plan.

How does a supplementary pension plan work via a group insurance policy?

Your employer takes out a group insurance policy for you and your colleagues. At fixed times, for example every month, they deposit an amount for you into that pension plan. This amount is invested by an insurer. In this way, a capital grows year after year that you can enjoy later.

What components can a group insurance plan consist of?

The most important component is the pension capital. But often there is more to it. For instance, there is usually also a death insurance policy. If you were to die before your retirement age, your partner or children would receive an amount. Some plans also include protection in case of long-term illness or an accident.

What is the tax treatment of the paid premiums?

For the employer:

For the employee:

What if you change jobs?

If you move to another employer, the accumulated capital remains yours. It stays in a separate pension account until you actually retire. In some cases, you can transfer it to your new group insurance plan, but this is not mandatory. You receive an overview each year and you can follow your full pension accrual on mypension.be.

When do you receive the money?

Your group insurance is usually paid out at the legal retirement age, currently 65. You then receive the accumulated capital in a lump sum or as a monthly annuity, depending on what has been agreed upon.

Do you pay taxes on your group insurance?

Yes, but less than on your regular salary. If you have worked until you are 65, you only pay 10% tax on the capital. In addition, there are some social contributions. What you retain net is often much more favorable than if you had received that amount through regular salary.

Is the capital always safe?

The government obliges insurers to guarantee a minimum return. This is currently 1.75%. If the insurer achieves less with your capital, the employer must make up the difference. You are therefore legally protected against a too low return.

How much must an employer contribute?

The answer to the question "How much should I contribute?" starts with the question "What do I want to achieve for my employee?" Do you want a simple supplementary pension? Or do you really want to offer an attractive, competitive remuneration that also includes death coverage or protection in case of disability?

There are roughly three approaches:

  1. Basic coverage: 1% to 3% of gross salary.
  2. Market-conform accrual: 4% to 6% of gross salary.
  3. Premium plan (for key profiles): 8% or more.

Suppose you have an employee with a gross annual salary of € 60,000.

Note: on top of these premiums, there are also social contributions:

These are calculated on the contributed amount and are at the employer's expense.

How much is the tax advantage?

A group insurance plan is tax-advantageous for both parties. As an employee, you build up a pension smartly, usually without having to do much yourself. As an employer, you offer an attractive benefit to your team, showing commitment and helping employees plan for their future.

Yes, the paid premiums are fully deductible as a professional expense for you as an employer, as long as you comply with the 80% rule. This means that the total of all legal and supplementary pensions on an annual basis may not exceed 80% of the employee's last normal gross annual income.

If this limit is exceeded, the surplus is not tax deductible.

How should pension premiums be invested?

In Belgium, for group insurance plans with fixed contributions (so-called "defined contribution" plans), there is a legally guaranteed minimum return. This currently stands at 1.75%. If the effective return of the contract is lower, the employer must make up the difference.

This guarantee is imposed by the Law on Supplementary Pensions (WAP). It ensures that employees enjoy a certain protection, but it simultaneously places a financial risk on the employer if the investments yield too little.

Traditionally, many employers therefore opt for a Tak 21 approach. They will offer a return of a maximum of 2.5%.

Tak 23 insurance plans invest in equity and bond funds, just as you would in the third pillar. They have no capital guarantee and no guaranteed return. As a result:

For long-term plans, Tak 23 in ETFs can be very valuable.

When must the 1.75% be met?

The guarantee applies at the time of the employee's termination of employment, pension withdrawal, or death, and this for each premium individually, from the moment of contribution until the moment of payout.

A premium contributed on January 1, 2020, must have yielded at least 1.75% per year over those 10 years by January 1, 2030 (e.g., upon leaving or retirement).

So you don't have to achieve that 1.75% every year, but at the end of the line, the average return must be at least 1.75% per year.

If the actual return is lower, the employer must make up the difference. This is called the "bijpassingsverplichting" [obligation to adjust]. It may therefore be that the insurer, for example, only achieved an average of 1.2%, and the employer must supplement the remaining 0.55% return. This is also why most employers choose Tak 21 contracts with capital and interest rate guarantees: the risk then lies with the insurer, not with the employer.

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