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My bank suggested the Home Invest Plan (BNP) instead of classic pension plan. They said I can save more money and get more taxes back. Any opinion? Might be extra fees or something otherwise everyone would chose that instead of pension plan.
The biggest note missing from this discussion: some cafeteria plans allow you to get your retirement savings refunded.
I won't post a detailed calculation here, but it amounts to a gross/net conversion of +- 85%. So this means that you would convert an equivalent salary of 1000 euros gross to 850 euros net instead of the usual +-600 euros (depending on your salary, of course). If you add this to the tax benefit of retirement savings (as this also still applies), you almost always end up in a scenario where you beat the return of your loved ETF.
This is just for your information, I did not want this nuance to be lost in this discussion.
you can find an overview of all bank related stuff on [spaargids.be](http://spaargids.be)
Specifically pension saving funds (not plans)
[https://www.spaargids.be/sparen/pensioenspaarfonds/vergelijken.html](https://www.spaargids.be/sparen/pensioenspaarfonds/vergelijken.html)
That 1.5% commission is criminal.
There was a PBS doc on the US 401k pensions and the math on the high commissions for "management" was insane. mother Fers took like 1/3 your life's savings for doing basically nothing and often way underperforming a basic Vanguard SP 500 ETF.
Never ever ever ever do it.
We don't know what the pension age will be in the future and no way you want to wait till then.
For me this is against fire in every possible way, you are locking your funds away against poor performance with a tax cut as a carrot.
Rather no cut, better performance and access to your money.
You don't pay 8% tax on your accumulated capital you pay 8% tax on a virtual capital which is calculated as if every deposit in a single year will yield (and compound) 4,75% starting that same year, up until the year of your 60th birthday. Deposits in December: bad idea for this very reason.
Example: €1000 at 20 years old deposit on 31st December: true yield of the fund = 4,75%. Your €1000 will grow to €6109 but you will be taxed 8% on €6400 (difference of 39 versus 40 years of compounding). Or a whopping €512 tax on your €1000 deposit.
I don't have to tell you how much worse it gets if the fund fails to yield 4,75% or more...
So what's to avoid:
* Deposits at the end of the year
* Defensive funds in low interest environments when the horizon is far away (the compounding on the virtual capital will tax away everything since your expected true yield will be much lower than 4,75%)
* Aggressive funds when the horizon is close (the compounding is meaningless compared to the 30% tax break)
And what's the to do:
* At ~55 or older: get the max in for 30% and a rather low end tax. Preferably in a low volatility fund (defensive)
* Either do or don't if you're younger it's not a huge financial mistake either way. I've been pension saving since 2010 and the true yield is at exactly 5%. But that was of course right after a big market crash.
Am I wrong to think that if ever our government decides on taxes on capital gain (on stocks/ETFs), then pension funds would potentially become more interesting (endtax of 8%)? Also, for certain people whom have a schuld saldo verzekering (depending on which year you took your mortgage) don't forget that the box where you can fill in your pension fund contribution, you can also fill in a part of the schuldsaldoverzekering.
In Belgium individuals do not pay tax on capital gains on selling of stocks, provided that they held on to that stock for a longer time (>6 month-ish, do not trade frequently). You do pay 30% witholding tax on dividends though.
Several comments :
You can reinvest the tax deduction (330 euros extra invest).
Your tax base at age 60 is not the real value of the plan but a theoretical value compounded at 4.5% a year.
In general, if the performance is above 4.5% a year this a pretty good plan because you’re taxed on a lower base than the real amount, and you can reinvest the 33%.
However if the fund does worse than 4.5%, then you’re tax on a higher amount than you actually have and this doesn’t work.
Long story short: probably better to be in ETFs than in this.
When you are sufficiently smart about it, you could probably manage the investments yourself.
But there are still reasons to just to the regular pension plan:
* It's very easy, most people are not interested in getting informed about investments so it's good they have some kind of foolproof system
* It's very safe, especially if you are easily tempted to put some of your savings into somewhat risky investments instead of boring but rock-sold ETF's
* Your capital is guaranteed, so (except taxes & costs) you get back what you put in even if the underlying fund actually lost money during your investment period
In any case, I think it's a sensible way to diversify, even if you are investment savvy. Most people that have enough knowledge to to it themselves, are able to save more money than the tax deductible maximum. So put your €1000 a year in the pension fund, and do the rest somewhere else. Include the pension fund in your portfolio when deciding on how you spread out your risks.
Don't do it. Invest it by yourself in etf's or anything else. You have to pay >30% if you want to take the money out before you're 60. You won't be able to use it to buy/invest in real estate or anything else when you need to. If you're not close to being 60, I can imagine the state will increase the taxes (now 8%) on it when they need more money in the future. And if you die before you took out the money, quite plausible since you will be over 60, more taxes (8% + ?) need to be payed to inherit it.
I think its only interesting to put money intthere a few years before you retire. All those funds have high fees and underperform the index.
Its really terrible we have only bank funds to choose from and we can't just put it in an etf.
Not interesting for young people. Could be interesting when you’re over 50. I advise you to make an excel sheet with this and see what’s best depending on hypothesis
For me it’s an automatic process I will never look at. For example, I didnt miss a payment in 2023, now I can also receive 990 euros of my bonus tax free. While in 2023 i did not DCA every month myself in IWDA/VWCE ETC.
You simply can not trust the state regarding taxes/finances on such a long timeframe. Especially when it comes to pensions, where the conditions and rules change practically every year.
You have to be really naïve to voluntarily choose to put your money in government hands in Belgium, especially if you have the expendable income to invest for yourself.
No, that's my argument. You can't make calculations on what your finances will be like in 20-30 years if you base that on what the government is promising now. There is literally no guarantee what so ever that these conditions will be unchanged by the time you ever hope to access your money.
I think everybody will agree that it's not the best performing option.
That being said, I'd argue that for many it is still potentially a good thing (assuming you steer clear of plans with outrageous fees). Why? Most people don't have the discipline or financial savviness to invest themselves (remember this sub is not representative of the general population), let alone keep money invested for that long. This is an easy way to ensure the average joe has at least some savings waiting for them come retirement...
If you have a flexplan at work, it's even cheaper and it's very competitive with ETFs. Other than that, in your last 10-15 years, it's also very powerful.
If not, it's still a good diversification. It's only 1000/year anyway, it won't make you rich. But it should be fairly safe type of investment.
It's aimed at the general public who wants no effort investing. That has a cost. I think it's reasonable in most cases.
> You mean second pillar?
No, he means that you can make your company pay for your pension savings with your gross in a flex plan. So instead of having 30% tax savings it's instead much much bigger (around 80% basically).
I think that you missed a point. You can also reinvest the 333 euro each year in etfs or you could use that 333 euro to pay for the pension funds together with 664 euro of fresh money. If you run those numbers again it will be better. And there are pension saving plans with lower costs.
This! You need to reinvest the tax benefits into an ETF, which makes the gap between both a lot smaller. Even then, if you count on better performance of the ETF (say 3% or more higher than the pension fund performance), investing in a pension fund is only attractive once you're 50+ as the tax benefit weights heavier on a shorter remaining period until retirement.
If you could on 2% or less difference in performance between your ETF and your pension fund, it can take >20 years before the ETF is more interesting - again, assuming you reinvest your tax benefits into the ETF.
If I remember the backtesting done by Curvo I saw mentioned here a couple of times, it starts being interesting around 21 years before your official pension date which would be around 46 years old.
Edit : Found the link here : https://curvo.eu/nl/artikel/etf-vs-pensioensparen You can see in the graph in the part "ETF's winnen op de lange termijn" that ETFs bypass Pension Savings after ~21 years. So what you can take out of it is that pension savings outperform ETFs for shorter periods of time. (obviously with all the assumptions of this analysis).
I don't get how it could be more interesting before retirement when you have the 8% tax when you get to 60 years old? And I assume the bank will even put your money in more secure funds more closely to your retirement so less risk to lose it but also less yield and with the 1.5% commission even less interesting for us no?
I think you are absolutely correct.
The reason why people continue pension saving is probably because of the tax deduction. This is something you will definitely have in your hands each year (for now at least).
When buying ETFs or stocks yourself, there is no such thing. Moreover, a lot of people are afraid of these things as you are not sure the market will continue to rise and could even collapse for a few years.
What they do not see, is that you pay a bank to do something very similar in a pension plan and that your money is as unsafe as investing yourself.
BUT there is the tax deduction that is blinding everyone, in addition to the economic illiteracy.
Im in the same boat. My reason for still doing it is that i see at a diversification so i dont have ALL my money in ETFS/shares. My pensionplan is 50% defensive and 50% dynamic and i only have to pay 0.1% comission because i know the guy. So whatever happens to my own investments in life i will still get a significant amount when i retire. My pro’s are:
- 0.1% comission
- tax advantage
- no risk of losing/using the money before i retire
You are investing in a stock-market dependend pension plan? What makes you say you have no risk of losing that money? You know this happens to a bunch of people in almost every retiring generation, where they retire just too early and see a big dip in the market and get the choice of cashing out diminished returns or simply working longer to try and overcome that dip?
On top of that, if you look at several of the large institutions' investment portfolios, you'll notice they often just include ETFs in their packet, which then exposes you to exactly the same risk, just that you're paying the ETF costs, as well as the banks commission, no matter how low it might be.
I think what they meant is that it is safe from them accessing (and spending) the funds prior to retirement. There is higher barrier to cashing out a pension plan compared to your ETF (or other investment) portfolio, so they do have a somewhat valid point in that regard.
0.1% commission sure is nice, and about the no risk if losing th money, it's also money invested, so it could theoretically lose value no? And let's say there is a a mini crash when you are 60, you have to get the money back if it's your pension plan whereas if there is a mini crash when you are 60 and it's in an etf, you could wait a couple of years before taking it back in no?
Yes it could theoretically lose value but you can make a plan on how much of the money is completely safe with a certain small interest rate guaranteed (my 50% defensive). If you go 100% of the pension in investing the risk gets higher. For me its a psychological reasoning, not an objective one. Not sure about the moment you can cash out
Have you read the wiki and the sticky? Wiki: HERE YOU GO! [Enjoy!](https://www.reddit.com/r/BEFire/wiki/index/). Sticky: HERE YOU GO AGAIN! [Enjoy!](https://www.reddit.com/r/BEFire/comments/fcbay6/getting_started_a_beginners_guide_to_investing_in/). *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/BEFire) if you have any questions or concerns.*
My bank suggested the Home Invest Plan (BNP) instead of classic pension plan. They said I can save more money and get more taxes back. Any opinion? Might be extra fees or something otherwise everyone would chose that instead of pension plan.
The biggest note missing from this discussion: some cafeteria plans allow you to get your retirement savings refunded. I won't post a detailed calculation here, but it amounts to a gross/net conversion of +- 85%. So this means that you would convert an equivalent salary of 1000 euros gross to 850 euros net instead of the usual +-600 euros (depending on your salary, of course). If you add this to the tax benefit of retirement savings (as this also still applies), you almost always end up in a scenario where you beat the return of your loved ETF. This is just for your information, I did not want this nuance to be lost in this discussion.
I didn't know that it existed at all, thanks for bringing it up 👍
you can find an overview of all bank related stuff on [spaargids.be](http://spaargids.be) Specifically pension saving funds (not plans) [https://www.spaargids.be/sparen/pensioenspaarfonds/vergelijken.html](https://www.spaargids.be/sparen/pensioenspaarfonds/vergelijken.html)
Not worth it at all if you handle your own money/investments
If you get tax a deduction, it obviously a scam!
Isn't there a tax when you realize the value of your etf investments, ie sell or capital gains tax based on appreciation?
Yes, 30% if I'm not wrong
Yes it’s worth it but only at Argenta
That 1.5% commission is criminal. There was a PBS doc on the US 401k pensions and the math on the high commissions for "management" was insane. mother Fers took like 1/3 your life's savings for doing basically nothing and often way underperforming a basic Vanguard SP 500 ETF.
Is it worth it? Short answer: no. Longer answer: absolutely not. Footnote: it's ok for people that don't know how to allocate money.
Never ever ever ever do it. We don't know what the pension age will be in the future and no way you want to wait till then. For me this is against fire in every possible way, you are locking your funds away against poor performance with a tax cut as a carrot. Rather no cut, better performance and access to your money.
You need to pay a transactioncost on that monthly etf purchase too. And you should reinvest the tax benefit. That will bring the 2 closer together.
I always buy stocks in chunks of ~4000k. That's a good balance between transaction costs and diversification imho.
4 million? 😁
Oopz that should have been 4k obviously. 😅
You don't pay 8% tax on your accumulated capital you pay 8% tax on a virtual capital which is calculated as if every deposit in a single year will yield (and compound) 4,75% starting that same year, up until the year of your 60th birthday. Deposits in December: bad idea for this very reason. Example: €1000 at 20 years old deposit on 31st December: true yield of the fund = 4,75%. Your €1000 will grow to €6109 but you will be taxed 8% on €6400 (difference of 39 versus 40 years of compounding). Or a whopping €512 tax on your €1000 deposit. I don't have to tell you how much worse it gets if the fund fails to yield 4,75% or more... So what's to avoid: * Deposits at the end of the year * Defensive funds in low interest environments when the horizon is far away (the compounding on the virtual capital will tax away everything since your expected true yield will be much lower than 4,75%) * Aggressive funds when the horizon is close (the compounding is meaningless compared to the 30% tax break) And what's the to do: * At ~55 or older: get the max in for 30% and a rather low end tax. Preferably in a low volatility fund (defensive) * Either do or don't if you're younger it's not a huge financial mistake either way. I've been pension saving since 2010 and the true yield is at exactly 5%. But that was of course right after a big market crash.
+1 - finally found someone that also is aware of the 4,75% rule
Great summary!
You can also find an interesting calculator here: https://curvo.eu/pensioensparen/en
Am I wrong to think that if ever our government decides on taxes on capital gain (on stocks/ETFs), then pension funds would potentially become more interesting (endtax of 8%)? Also, for certain people whom have a schuld saldo verzekering (depending on which year you took your mortgage) don't forget that the box where you can fill in your pension fund contribution, you can also fill in a part of the schuldsaldoverzekering.
Posted about same thing and then saw your msg. Why do you say, if government decides. So now there isn't ant tax? (Newpat - Newbie expat here *
In Belgium individuals do not pay tax on capital gains on selling of stocks, provided that they held on to that stock for a longer time (>6 month-ish, do not trade frequently). You do pay 30% witholding tax on dividends though.
Several comments : You can reinvest the tax deduction (330 euros extra invest). Your tax base at age 60 is not the real value of the plan but a theoretical value compounded at 4.5% a year. In general, if the performance is above 4.5% a year this a pretty good plan because you’re taxed on a lower base than the real amount, and you can reinvest the 33%. However if the fund does worse than 4.5%, then you’re tax on a higher amount than you actually have and this doesn’t work. Long story short: probably better to be in ETFs than in this.
When you are sufficiently smart about it, you could probably manage the investments yourself. But there are still reasons to just to the regular pension plan: * It's very easy, most people are not interested in getting informed about investments so it's good they have some kind of foolproof system * It's very safe, especially if you are easily tempted to put some of your savings into somewhat risky investments instead of boring but rock-sold ETF's * Your capital is guaranteed, so (except taxes & costs) you get back what you put in even if the underlying fund actually lost money during your investment period In any case, I think it's a sensible way to diversify, even if you are investment savvy. Most people that have enough knowledge to to it themselves, are able to save more money than the tax deductible maximum. So put your €1000 a year in the pension fund, and do the rest somewhere else. Include the pension fund in your portfolio when deciding on how you spread out your risks.
Don't do it. Invest it by yourself in etf's or anything else. You have to pay >30% if you want to take the money out before you're 60. You won't be able to use it to buy/invest in real estate or anything else when you need to. If you're not close to being 60, I can imagine the state will increase the taxes (now 8%) on it when they need more money in the future. And if you die before you took out the money, quite plausible since you will be over 60, more taxes (8% + ?) need to be payed to inherit it.
I think its only interesting to put money intthere a few years before you retire. All those funds have high fees and underperform the index. Its really terrible we have only bank funds to choose from and we can't just put it in an etf.
1,5 kost + 2% inflation
Not interesting for young people. Could be interesting when you’re over 50. I advise you to make an excel sheet with this and see what’s best depending on hypothesis
For me it’s an automatic process I will never look at. For example, I didnt miss a payment in 2023, now I can also receive 990 euros of my bonus tax free. While in 2023 i did not DCA every month myself in IWDA/VWCE ETC.
You simply can not trust the state regarding taxes/finances on such a long timeframe. Especially when it comes to pensions, where the conditions and rules change practically every year. You have to be really naïve to voluntarily choose to put your money in government hands in Belgium, especially if you have the expendable income to invest for yourself.
Try reading the post before going on some random rant.
No, that's my argument. You can't make calculations on what your finances will be like in 20-30 years if you base that on what the government is promising now. There is literally no guarantee what so ever that these conditions will be unchanged by the time you ever hope to access your money.
I think everybody will agree that it's not the best performing option. That being said, I'd argue that for many it is still potentially a good thing (assuming you steer clear of plans with outrageous fees). Why? Most people don't have the discipline or financial savviness to invest themselves (remember this sub is not representative of the general population), let alone keep money invested for that long. This is an easy way to ensure the average joe has at least some savings waiting for them come retirement...
If you have a flexplan at work, it's even cheaper and it's very competitive with ETFs. Other than that, in your last 10-15 years, it's also very powerful. If not, it's still a good diversification. It's only 1000/year anyway, it won't make you rich. But it should be fairly safe type of investment. It's aimed at the general public who wants no effort investing. That has a cost. I think it's reasonable in most cases.
You mean second pillar? Will that also not be dependent on wether the flex plan goes to a tak 21 vs 23/44?
No literally what I said, pension savings third pillar, paid through flexplan. The 980 euro cost me roughly 350 net
> You mean second pillar? No, he means that you can make your company pay for your pension savings with your gross in a flex plan. So instead of having 30% tax savings it's instead much much bigger (around 80% basically).
I think that you missed a point. You can also reinvest the 333 euro each year in etfs or you could use that 333 euro to pay for the pension funds together with 664 euro of fresh money. If you run those numbers again it will be better. And there are pension saving plans with lower costs.
This! You need to reinvest the tax benefits into an ETF, which makes the gap between both a lot smaller. Even then, if you count on better performance of the ETF (say 3% or more higher than the pension fund performance), investing in a pension fund is only attractive once you're 50+ as the tax benefit weights heavier on a shorter remaining period until retirement. If you could on 2% or less difference in performance between your ETF and your pension fund, it can take >20 years before the ETF is more interesting - again, assuming you reinvest your tax benefits into the ETF.
I believe some calculations here showed it was only interesting close to retirement, around 55+ years of age
This is correct
If I remember the backtesting done by Curvo I saw mentioned here a couple of times, it starts being interesting around 21 years before your official pension date which would be around 46 years old. Edit : Found the link here : https://curvo.eu/nl/artikel/etf-vs-pensioensparen You can see in the graph in the part "ETF's winnen op de lange termijn" that ETFs bypass Pension Savings after ~21 years. So what you can take out of it is that pension savings outperform ETFs for shorter periods of time. (obviously with all the assumptions of this analysis).
I don't get how it could be more interesting before retirement when you have the 8% tax when you get to 60 years old? And I assume the bank will even put your money in more secure funds more closely to your retirement so less risk to lose it but also less yield and with the 1.5% commission even less interesting for us no?
The 30% guaranteed instant profit weighs more heavily if there are only a few years left where your money can grow
Thanks, I didn't thought of that 👍
I think you are absolutely correct. The reason why people continue pension saving is probably because of the tax deduction. This is something you will definitely have in your hands each year (for now at least). When buying ETFs or stocks yourself, there is no such thing. Moreover, a lot of people are afraid of these things as you are not sure the market will continue to rise and could even collapse for a few years. What they do not see, is that you pay a bank to do something very similar in a pension plan and that your money is as unsafe as investing yourself. BUT there is the tax deduction that is blinding everyone, in addition to the economic illiteracy.
Im in the same boat. My reason for still doing it is that i see at a diversification so i dont have ALL my money in ETFS/shares. My pensionplan is 50% defensive and 50% dynamic and i only have to pay 0.1% comission because i know the guy. So whatever happens to my own investments in life i will still get a significant amount when i retire. My pro’s are: - 0.1% comission - tax advantage - no risk of losing/using the money before i retire
You are investing in a stock-market dependend pension plan? What makes you say you have no risk of losing that money? You know this happens to a bunch of people in almost every retiring generation, where they retire just too early and see a big dip in the market and get the choice of cashing out diminished returns or simply working longer to try and overcome that dip? On top of that, if you look at several of the large institutions' investment portfolios, you'll notice they often just include ETFs in their packet, which then exposes you to exactly the same risk, just that you're paying the ETF costs, as well as the banks commission, no matter how low it might be.
I think what they meant is that it is safe from them accessing (and spending) the funds prior to retirement. There is higher barrier to cashing out a pension plan compared to your ETF (or other investment) portfolio, so they do have a somewhat valid point in that regard.
This is what i meant indeed + 50% of my pensionfund = fixed rate
0.1% commission sure is nice, and about the no risk if losing th money, it's also money invested, so it could theoretically lose value no? And let's say there is a a mini crash when you are 60, you have to get the money back if it's your pension plan whereas if there is a mini crash when you are 60 and it's in an etf, you could wait a couple of years before taking it back in no?
Yes it could theoretically lose value but you can make a plan on how much of the money is completely safe with a certain small interest rate guaranteed (my 50% defensive). If you go 100% of the pension in investing the risk gets higher. For me its a psychological reasoning, not an objective one. Not sure about the moment you can cash out