Green light for pension reform by Minister Jan Jambon

Today, the Council of Ministers approved, in a first reading, the draft pension law. This reform, a key initiative of the Arizona coalition, aims to improve the long-term financial sustainability of the pension system by strengthening the link between actual work and the accrual of pension rights, and by harmonising the three pension schemes — for employees, civil servants, and the self-employed.

Gradual implementation and respect for acquired rights are the cornerstones of this reform. Changes will be introduced step by step, and the pension entitlements already earned by retirees will remain untouched. The Arizona government is taking a balanced approach that prioritises sustainability and social justice, with particular attention to women and vulnerable groups. Those who qualify for retirement in 2025 but postpone it until 2026 have nothing to worry about.

The reform will lead to a gradual alignment of pension rules across civil servants, employees and the self-employed, including the following measures:

• The currently lower retirement ages of 55 and 56 for railway staff and military personnel will be gradually raised to match the standard legal retirement age.
• Some civil servants can still retire with a full pension after 36 years of service. In the future, 45 years of employment will be required for a full pension across all sectors.
• Today, civil servants' pensions are still calculated based on their salary during the last 10 — or in some cases, even just the last 4 — years. After a long transitional period ending in 2062, this will shift to a calculation based on the final 45 years, aligning with the method used for employees and the self-employed.
• The minimum number of career years required to take early retirement will also be standardised. Currently, some civil servants can retire early after 40 years of work, while the threshold is 42 years for most other workers. These differences will be harmonised.
• The abolition of new entries into the civil service sick pension system will significantly increase accountability among public sector employers and pave the way for a modern sick leave system focused on prevention and reintegration. Public employers will no longer be able to offload long-term sick staff into early pension.

This harmonisation is essential in a labour market increasingly defined by mixed career paths. At the same time, the reform will reduce the financial burden of an ageing population and narrow the pension gap between men and women.

Another major pillar of the reform is a stronger link between employment history and pension benefits.

A Bonus Career break for the calculation of, specifically, civil servant’s pension. In order to obtain the annual pension amount in the public sector, the reference salary is multiplied by the number of employment years. That result is then multiplied by the 1/60 career break, the so-called bonus. An advantageous break applies for certain employees, so that they can reach the maximum pension more quickly. bonus -malus system will be introduced to encourage people to work longer and reduce the ageing cost. Pensions will be reduced for each year of early retirement before age 66 and increased for each year of postponement beyond that age. For those nearing retirement, the adjustment will be 2% per year; for younger cohorts with more time to adapt, it will increase to 4% and eventually to 5%.

However, this malus will not apply to anyone who has worked at least half-time for 35 years — or 7,020 working days — which is perfectly logical:

• The malus only affects those retiring early, i.e. before the legal retirement age. To qualify for early retirement, workers must already show at least 42 years of service. To avoid a malus, 35 of those years must be at least half-time employment.
• To be absolutely clear: people with long-term illnesses will not be penalised in any way.
  • Those who are long-term sick remain entitled to a sickness benefit, which will continue to count as 100% when calculating pension entitlements at the legal retirement age.
  • If they partially or fully return to work, their period of illness will still partly count toward eligibility for early retirement without a malus.
• Importantly, the reform ensures that women are not disproportionately affected. Women who interrupt their careers to take care of children or relatives — through official care leave — are considered to be working. We explicitly recognise this:
  • Care leave periods will not be counted against the limits placed on recognised (non-working) periods in the pension calculation.
  • These care periods will also count towards the 35 half-time working years required to avoid the malus. As a result, women who take care leave are protected from financial penalties.
• Our decision to count one half-time working year as a full career year was not made lightly. It reflects the reality that women are more likely to work part-time and take on caregiving responsibilities within the family.

“This pension reform is essential to safeguard the sustainability and continuity of our pension system in an ageing society. Without action, we risk being overwhelmed by unpayable costs. Our reform is gradual, respects acquired rights, encourages longer careers and guarantees decent pensions while preserving social solidarity,” concludes Minister Jan Jambon.