The 80% Rule: A Key Principle for Your Individual Pension Commitment or Group Insurance

Company directors and self-employed managers can supplement their statutory pension with an Individual Pension Commitment (IPC) or a Group Insurance Policy. These forms of the second pension pillar offer an attractive tax advantage: the premiums can be deducted as business expenses by the company.

However, this fiscal benefit is not automatic. To qualify, you must comply with the 80% rule.

What Is the 80% Rule?

According to this rule, the total of your statutory and supplementary pension may not exceed 80% of your “normal” gross annual remuneration for the last income year.

If this limit is exceeded, the company cannot deduct the portion of the premium that causes the excess as a business expense.

The Calculation Formula

The general formula is as follows:

Supplementary pension ≤ (80% of normal gross remuneration – statutory pension) × (n/D) × (coefficient) – other supplementary capital

Key elements:

• Normal gross remuneration includes regular monthly earnings plus recurring benefits in kind (e.g., company car, private use of company-owned housing, etc.).One-off bonuses or director’s fees are not included.
• Estimated statutory pension:
  • 25% of gross remuneration for the years before 2021 under self-employed status (subject to annual legal minima and maxima);
  • 50% of gross remuneration for the years after 2021 (regardless of social status).
• n/D represents the number of service years already accrued (and to be accrued) divided by a full career (currently 40 years for a self-employed person).The ratio cannot exceed 1.
• Coefficient converts the annual annuity into a capital sum and depends on the end age and any indexation or transfer rights. It generally ranges between 11.37 and 18.37.
• Other supplementary capital includes pension rights already accumulated through other schemes (such as a Free Supplementary Pension for the Self-Employed (FSPSE), Pension Agreement for the Self-Employed (PASE), INAMI contracts, etc.), which must be deducted.

Important Considerations

• The calculation assumes a flat 20% profit participation.To determine the maximum insurable capital, divide the result by 1.20.
• The FSPSE (Free Supplementary Pension for the Self-Employed) is not subject to the 80% rule, but its accumulated capital is taken into account when calculating the maximum premium for your IPC or group insurance.
• The insurer can only issue a tax certificate if the 80% rule is respected, based on the information provided by your company.When paying a single premium, the same control is applied.

Complying with the 80% rule is crucial to ensure:

• the tax deductibility of the premiums paid by your company; and
• the optimal build-up of your supplementary pension, without risking a fiscal adjustment.

Before taking out an Individual Pension Commitment or Group Insurance, it is advisable to have a simulation of the 80% rule prepared by your accountant or insurance advisor.