What is a VAPW?
At the end of last year the government decided to expand the second pension base with a VAPW, a Free Supplementary Pension for Employees. The VAPW is a fiscally interesting solution to build up a supplementary pension and was created for wage earners who have no or only a limited collective pension plan with their employer. This new pension arrangement took effect on 27 March 2019.
The basic principle is that employees can ask their employer to deduct an amount from their net salary and deposit it in a VAPW contract.
Who is eligible for an additional pension via the VAPW scheme?
- Employees who do not have a pension plan or group insurance with their employer.
- Employees who are already building up a pension via a pension plan or group insurance with their employer, but for whom the total of the premiums in the group insurance and a possible sector plan is lower than 1,600 euro per annum or 3% of their reference wage*.
Or vice versa: employees who are already saving 3% of their reference wage or more than 1,600 euro as a supplementary pension via their employer are excluded from the VAPW scheme.
Did you know that you can easily calculate whether you are eligible to build up a supplementary pension via the VAPW scheme on the MyPension.be website? You can also find the amount of any pension reserves already accrued in the second pension base here.
What are the benefits of the VAPW scheme?
- VAPW provides an additional option to build up a supplementary pension to a group of employees who until now could not save towards their pension in the second base.
- Pension accrual via a VAPW contract entitles you to a 30% reduction of the saved amount on personal income tax.
- VAPW can be combined with individual pension savings and long-term savings.
- The employee decides how much they save annually via the VAPW scheme. A statutory annual limit of 3% of the reference salary, with a minimum of EUR 1,600, applies.
- Employees can decide which formula to use to build up supplementary pension: Branch 21, Branch 23 or a combination of both.
How does the VAPW scheme work?
The VAPW principle is simple: the employee asks their employer to deduct an amount from their net salary and to transfer it into a VAPW contract.
What should you, as an employee, do if you would like to take out a VAPW?
You must first enter into a pension contract (via your broker) with an insurance company. You will then receive a certificate which you must submit to your employer, who will then deduct a monthly contribution from your net salary and deposit this amount in your pension savings contract.
What should you, as an employer, do if an employee would like to take out a VAPW contract?
Many employees initially approach their employer if they want to initiate a VAPW contract. However, they first need to conclude a pension contract with an insurer, who will provide a certificate that they must submit to you. Once you have received this certificate, you can deduct the desired monthly amount from your employee’s net salary and transfer it to your employee’s chosen insurer or pension institution.
As an employer, you bear no further responsibility. For example, you do not have to guarantee a return. In that respect, the VAPW differs from standard group insurance, where you, as an employer, are obliged to guarantee a minimum return of 1.75% (also see the Supplementary Pensions Act or WAP).
What can Van Dessel do to assist you?
In our role as a broker, we are happy to advise you on the various possibilities for building up a supplementary pension. If you opt for a VAPW, we explain which formulas you can use to save and what the potential risks and expectations are regarding returns.
Within the context of a VAPW, the reference wage is the gross annual salary including other wage components (bonus, holiday pay, etc.) that the employee received two years prior to the year in which he effectively starts to save.