What exactly is the situation regarding the final tax on pension savings?
If you save for your pension and have benefited from annual tax relief, the capital you’ve accumulated will ultimately be subject to a final tax charge. Find out below when and how final tax is collected on pension savings.
On which amount is the final tax calculated?
In the case of pension savings funds, your savings are taxed. The government uses a notional return of 4.75% on the amounts deposited in the fund. If your actual return ends up being higher, the good news is that this surplus is not taxed.
Note: the notional return for deposits made before 1992 is 6.25%.
In the case of pension savings insurance plans, your final tax is calculated only on deposits earning a guaranteed rate of interest. Anything you may have accrued through profit sharing is not taxed.
What’s the situation if you started pension saving before your 55th birthday?
In that case, you pay a final tax at the special rate of 8% on your 60th birthday. After that, it remains worthwhile continuing pension saving up to and including the year you turn 64. That’s because the amounts you pay in after your 60th birthday still generate tax relief of up to 30%, but you are no longer taxed on those deposits.
If you've been saving towards your pension since 2014 or earlier, you’ve already paid some of the final tax in advance between 2015 and 2019 (i.e. the tax has been collected early). Your contributions in that period will be deducted from your final tax bill when you turn 60.
Note: increasing the amount you pay into your pension savings after you turn 55 could result in the final tax being deducted 10 years after this increase. As this has detrimental consequences for you, KBC calculates a maximum tax-deductible amount specifically for you to ensure you never end up in that scenario. Learn more about pension saving after turning 54.
What’s the situation if you started pension saving on or after your 55th birthday?
Pension saving remains equally as tax-efficient up to and including the year you turn 64. In this scenario, too, you pay a final tax at the special rate of 8%. Unlike the situation for those who started pension saving at a younger age, the government usually charges this final tax after your contract has run for 10 years. For example, if you start saving on your 56th birthday, you have to wait until you turn 66 before you can withdraw your savings at the favourable final tax rate.
If you've been saving towards your pension since 2014 or earlier, you’ve already paid some of the final tax in advance between 2015 and 2019 (i.e. the tax has been collected early). Your contributions in that period will be deducted from your final tax bill.
If you want to take the money out of your pension savings contract before you turn 60, it will be subject to a less favourable tax treatment (which is not covered here). This situation should therefore be avoided at all costs.
If you’ve never received tax relief on your pension savings, no final tax will be charged on them. In that case, you have to ask your local tax office for a document which you then have to submit to your financial institution or insurance company.