BELGIUM - The weighted average return for Belgian pension funds was -12.11% in 2002, according to provisional financial results from the Belgian Association of Pension Funds (ABFP).
This was in the context of a drop in the MSCI EMU index of 34% and a fall of 25% in the Belgian index Bel20.
However, over the long term, since ABFP’s first survey in 1985, the average annual return for Belgian pension funds is 7.37%.
The results represent a limited number of Belgian pension funds, comprising E4bn, or one third of the assets of Belgian pension funds as a whole.
The funding levels of Belgian pensions will become clearer during the next few weeks after detailed actuarial calculations, but the ABFP is confident, based on the latest financial results, that in the main funding remains above 100%.
According to a new country report by the Organisation for Economic Co-operation and Development, the new Belgian law on supplementary pensions should raise the coverage of second-tier schemes, as the tax benefits on this type of saving have been increased.
In view of the pending pressure on the pension system from population ageing, the government introduced a bill to Parliament in 2002 aimed at extending participation in occupational pensions which provides for collective sectoral pensions that benefit from additional tax advantages, provided the scheme is open to all workers in a specific economic branch.
However, the OECD said it is not clear what social benefits are gained by subsidising the return on second-pillar savings, which mainly benefits middle to high earners: “Taxation of these returns should be increased at least to zero, as in many other countries.
“At the same time, the regulatory framework for second pillar savings should be made more attractive, notably by improving pension portability and adopting a ‘prudent person’ approach to rules on asset allocation (which would increase long-run returns).”