The European Savings Institute (L'Observatoire de l'Epargne Européenne – OEE) has called for more transparency in the Belgian second and third pension pillars, as it noted that both pillars have experienced low returns over the longer term.

Speaking at a Better Finance webinar yesterday, 5 November, OEE economist, Laetitia Gabaut, presented a case study on Belgium’s pensions sector.

Data reveals that in 2022, assets under management (AUM) in the second pillar amounted to €114.8bn, with 25 insurance companies and 138 IORPs providing pensions. In terms of coverage, 83.6 per cent of the population is affiliated to either an active or dormant pension.

For the third pillar, AUM in 2022 was €53.64bn, managed by 21 pension savings funds and insurance companies. Gabaut noted that 68 per cent of the population is covered by a voluntary pension product.

However, returns in both pillars have been poor over the longer term. Although the real annualised return in 2023 was 9.2 per cent (pillar II) and 9.3 per cent (pillar III), over a 10-year period this drops to 1.7 per cent (pillar II) and 1 per cent (pillar III) and to 1.3 per cent (pillar II) and 1 per cent (pillar III) over the whole period.

“We can see that the real annualised performance is quite low and there is a big erosion of purchasing power of the savings due to inflation,” Gabaut noted.

In Belgium, insurance companies play a big role in second- and third-pillar pensions, known as an ‘assurance groupe’. However, Gabaut said there is a “lack of information” from these companies, even though the companies represent a large part of the AUM in the second and third pillars.

'Assurance groupe' products represented more than two-thirds of AUM managed in pillar II and voluntary insurance products represented more than half (58 per cent) of AUM in pillar III.

Commenting, Gabaut said: “Savers and employees should have access to better and more transparent information.”

She also said that inflation has had a “real impact” on these savings and employees should be provided with “better information” on this and the legal guarantee.

The legal guarantee is a guaranteed minimum return on pillar II pensions, which sees pension providers top up savers’ pensions to a set percentage amount. Currently, this is set at 1.75 per cent but will increase to 2.5 per cent in January 2025.

“In the third pillar it is also the same, products should be more transparent on charges and the returns,” she concluded.

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