Key implications of the new “transparency” law for second pillar pensions

Belgian legislation enacted on 26 December 2022 (known as the “transparency” law) aims to enhance transparency within the second pension pillar, both regarding the data that members receive from their employer or pension institution, and the individual pension information members can access on mypension.be.

The new transparency law introduces several changes to the social legislation concerning supplementary pensions, including for employees, the self-employed, and company directors. The amendments are to be implemented via a phased approach. The general provisions will be effective as from 1 January 2023, with several other specific provisions coming into effect at later dates.

This alert summarises the key amendments.

Purpose

To increase trust in the second pillar and the pension system in general, the law refers to the provision of comprehensible information to members (avoiding jargon, information overload, and unnecessary details) as well as promoting uniform information across different pension institutions (i.e., insurers and pension funds).

Pension benefit statement

The main changes made to the pension benefit statement (the new term for the annual pension statement) are as follows:

• The projected benefits are calculated at the legal retirement age (rather than the retirement age specified in the plan rules). This change may, in some cases, have an impact on the calculation of the 80% limit;

• In cases where economic scenarios affect the calculation of the projected benefit (primarily for defined contribution and cash balance schemes), calculations must include the most realistic scenario, a favourable scenario, and an unfavourable scenario;

• The contributions from the previous calendar year must be indicated, distinguishing between individual contributions and employer contributions;

• A breakdown of costs deducted by the pension entity that have an impact on the member’s rights, as well as the attributed returns, must be provided; and

• Sigedis is responsible for generating pension benefit statements and providing the statements free of charge to members annually in their e-Box, as well as in the member’s document space on mypension.be. Individuals will be notified of this process if they have registered their personal email address with Sigedis; otherwise, the pension institution is responsible for sending the statement to active members. Sigedis will provide the document to pension institutions free of charge for this purpose. Additionally, mypension.be will be aligned with the new pension benefit statement.

A royal decree is expected to clarify the content of the future retirement benefit statement.

Procedure for payment of benefits

The law establishes a requirement for a single information obligation for the pension institution.

Payment must be made by the pension institution within 30 days from the receipt of the necessary information to determine the payment. In the event of delay, interest of 5.25% will be payable.

A simplified procedure applies where the benefits amount to less than EUR 150 (amount subject to indexation).

Information obligations

The law introduces a series of new measures aimed at providing clear, accessible, and understandable information to members and pensioners. Key measures include:

• Prior to or at the time of joining the plan, the pension institution must provide certain information to the member. This includes: investment options; characteristics of the pension plan; how environmental, social, and governance factors are considered in the investment strategy; and past investment performance over a minimum period of five years (if members bear investment risk). The Financial Services and Markets Authority (FSMA) has been authorised to establish a model by 2025.

• The pension institution must automatically provide a transparency report to members and pensioners. This report must be downloaded on a “durable medium” and contain information regarding the investment strategy, financial risks, and past investment performance (if members bear investment risk). Upon request, information regarding the assumptions used to generate the projections in the pension benefit statement must be communicated to members and pensioners.

Entry into force

The law provides for a phased implementation, with consideration having been given to factors including the time required to develop technical standards in the form of a royal decree and/or regulations by the FSMA, in consultation with social partners, pension institutions, and Sigedis.

The general provisions will be effective as from 1 January 2023, with several other provisions coming into effect at a later date, namely:

• The provisions related to the pension benefit statement and the information to be provided upon retirement or death will come into effect on 1 January 2024;

• The provisions regarding the membership document will come into effect on 1 January 2025; and

• The provisions concerning the transparency report apply to reports for 2025 and subsequent years, with the first reports required to be prepared in 2026.

Actions to consider

• Review the pension plan rules and amend them where necessary to ensure that they are aligned with the law.

• Review the internal (governance) documents and procedures and amend them where necessary to reflect the new requirements and procedures.

• New computations of the benefits at retirement may need to be made in certain circumstances for some pension plans (primarily pension schemes where the retirement age remains 60 years) This may also have an impact on the 80% limit.

• Ensure compliance with the implementation measures and maintain readily accessible information as required for Sigedis.