June 21, 2024

Taylor Daily Press

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Why is there such a big difference between the three pension systems in our country?

Why is there such a big difference between the three pension systems in our country?

In recent years, the federal government has taken various measures to reduce the difference between the pensions of civil servants, employees and the self-employed. Such interventions have become more than necessary, after the difference between the three pension systems has increased in recent decades.

Why is this important?

This article was created thanks to a question from a reader. He wondered why there was such a big difference between the three pension systems (civil servants, employees and self-employed) in our country. Do you also have a question for the editors? Do not hesitate and send it to this address.

context: The difference between the three retirement systems is significant.

  • The average pension for civil servants in 2021 totaled €2,978. For an employee this total was €1,363 and for a self-employed person it was €891.

details: This marked difference has grown historically.

  • Civil servants receive the highest pension. The government was able to justify higher pensions because civil servants earn lower wages than those working in the private sector. At that time there was talk of “deferred wages.”
  • The decline in pension amounts among the self-employed has various reasons. Consider, for example, the late introduction of the proportional pension in 1984 and the low average income of the self-employed.
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Pension reform

Zoom in: This government has already taken various measures to reduce the difference between these systems.

  • Let us consider here, for example, the reform of so-called equality. Thanks to this system, the pensions of civil servants increase with the wages of government employees, in addition to the benchmarking. This adjustment is made every two years, in January of each odd year.
    • The system still exists, but has now been scaled back. From now on, the increase can reach a maximum of 0.3 percent per annum of the total pensions of civil servants. There can also be no transfer from one period to another.
  • In 2021, Prime Minister Alexander De Croo and his team harmonized the calculation of a self-employed person’s pension with that of an employee by eliminating the correction factor.
    • Since the 1980s, the self-employed pension has been calculated on the basis of 69 percent of occupational income.
    • Two years ago, the House of Representatives gave the green light to cancel the so-called correction factor for calculating the pension of self-employed workers.
  • The difference between the three pension systems is expected to narrow in the coming years thanks to the two interventions mentioned above, among others.
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