Many people in Belgium save for a pension, but they can also top that off nicely with a tidy bit of tax relief by starting a long-term saving scheme. You can combine the two and enjoy extra tax benefits.
After paying off your home loan
If you've taken out a home loan since 2015, we've some good news for you. There is a good chance that you still have some scope to combine the housing bonus with the tax benefit from long-term saving. This qualifies you for tax relief of 30% (capped at 2 260 euros for both schemes combined).
Once you retire
When you're retired, you can continue to enjoy this tax reduction for years, provided that you pay tax during your retirement. Please note: you need to start saving before your 65th birthday.
What are the advantages?
Long-term saving schemes give you a nice tax break. Depending on your income, you recoup up to 30% of the amount saved via your personal income tax.
For instance, if you pay in 1 000 euros a year, the tax man will later give you up to 300 euros back. In 2018 – depending on your income or pension – you can save up to 2,310 euros. This can save you up to 678 euros in tax.
In order to qualify for this tax break, the contract has to meet a series of conditions. These are explained in more detail with regard to the product.
The choice of scheme, and the return you get
Long-term saving is only possible in the form of endowment Insurance with tax breaks. The main advantage of this type of insurance is that it gives you a high degree of certainty. Every cent you save brings you a guaranteed fixed rate of interest. The amount saved is paid out when the policy expires. The expiry date is on or after your 65th birthday. In the event of death before the expiry date, the policy terminates on that date and the savings are paid out to the beneficiary.
Interest accrues on all payments into the scheme at a guaranteed rate over the entire term. The total return varies from year to year and depends on the insurer's results.
Accessing your money
With long-term saving, you save for as long as you want, though the contract must run for at least ten years and cannot be terminated before your 65th birthday. You should therefore put into it money that you can do without for a longer period. If you need to access your money sooner, you can surrender the policy at an earlier date, although this can incur a tax penalty.
The savings are subject to a tax on long-term savings on your 60th birthday, or ten years after the inception of the policy, if it is taken out when you are aged 55 or older. This tax exempts you from further tax. If you die earlier, the savings paid out are taxed under your personal income tax.
Once you benefit from tax relief on a saved amount, subsequent pay-out of the accumulated savings pot attracts a tax charge.
If you cash in your savings before your sixtieth birthday, or if the policy is taken out from the age of 55 years, within ten years after the inception of the policy, this may involve tax disadvantages.
The tax treatment may change in the future.
Tip for those in their 50s and 60s
- Are you over 50? Take out a long-term savings contract and enjoy years and years of attractive tax reductions. Select an expiry date far enough in the future, so that you can still enjoy this tax reduction after you retire.
- Are you over 60? To continue to enjoy tax relief for years to come, you need to take out a long-term savings contract before your 65th birthday. So, if you're already over 65, it's too late for you to take out a contract.
Already have a long-term saving plan with another bank or insurer?
You can still switch to KBC, totally hassle free. Because we'll take care of everything for you, like stopping payments to your existing contract and opening your new one with us. If you'd like us to maximise your tax relief as well, be sure to make an appointment.