54 – an important year for your pension savings plan
Whether you’re quietly looking forward to it or absolutely dreading it, retirement is getting closer. Pension saving helps you prepare for that moment when it finally arrives. Because one of the last things you want later in life are financial worries.
When you turn 60, you pay a final tax of 8% on what you’ve saved until then.
After paying that tax, you can choose to:
- Withdraw your money.
- Continue saving for another five years at most (you’ll still qualify for your tax benefit and not be taxed on what you put in).
What’s so important about turning 54?
You may not realise it, but it’s an important year for your pension savings plan. The law requires us to temporarily lock in your pension savings from your 55th birthday until you turn 60.
It means that you cannot increase the amount you deposit during those five years. If you do, your contract will be extended by 10 years, your final tax charge will be deferred and the earliest you can withdraw your money will be when you turn 65.
To protect you, therefore, we temporarily freeze the amount that’s in your pension savings plan.
If you want to keep your options open, you should save the higher maximum figure of 1,270 euros in the year you turn 54 if at all possible. This amount is then locked in and you are free to either continue paying that same amount or switch to a lower amount for the next five years.
How do we determine the maximum amount that is eligible for tax relief?
We first look at the amount you paid in when you turned 54. If you pay in a variable amount each year, we’ll work out the average percentage you deposited over the previous five years.
After your 60th birthday, you can choose how much you want to deposit into your pension savings plan again. No taxes will be deducted from these amounts, but you’ll still be able to take full advantage of your annual tax relief allowance.
A few examples
- If you paid the higher maximum amount eligible for tax relief when you were 54, (1,270 euros in 2022), that will also be your fixed maximum figure. Whether you deposit the same amount or less over the next few years doesn’t make any difference as far as you are concerned.
- If you deposited the lower maximum amount when you were 54, (990 euros in 2022), this is your fixed maximum and you can no longer opt for the higher figure for the next five years.
- If you deposited a lower amount when you were 54, we’ll work out the average replacement ratio of your deposits over the previous five years and multiply it by the higher maximum amount eligible for tax relief. The result will then be your maximum amount for the next five years.
Where can you find your maximum amount eligible for tax relief?
You can easily find this figure in KBC Mobile by tapping the ‘piggy bank’ icon and then ‘Tax-advantaged savings and investments’. Just tap your contract to see all the relevant information on your pension savings plan.
If you have questions or you’d like to know more, don’t hesitate to contact your KBC branch or KBC Live .