PSPS, IPA, PCS: which one is best for me?

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As we are all well aware, the statutory pension is under pressure. As a self-employed person, you must build up a supplementary pension if you wish to maintain your standard of living once you retire. There are many possibilities available to you: Private Supplementary Pension for the Self-employed (PSPS), individual pension agreement (IPA), Pension Commitment for the Self-employed (PCS), pension savings, long-term savings, etc. But which solution should you choose?

Each of these solutions has its advantages and disadvantages, and it is possible to combine several of them in order to maximise your tax benefit.

PSPS 

You can pay contributions for a PSPS in your own name or pay the contributions through your company. There are two options: classic PSPS or social PSPS.

  • Classic PSPS: in 2019, you can pay a maximum of 8.17% of your net professional taxable income, with an absolute maximum of €3.256,87 (2019 revenues, 2020 fiscal year). You may thus build up a supplementary pension.
  • Social PSPS: in this case you build up a supplementary pension and also benefit from solidarity guarantees (work incapacity and death coverage, etc.). In 2019, you can pay a maximum of 9.40% of your net professional taxable income, with an absolute maximum of €3.747,19 (2019 revenues, 2020 fiscal year). 

A PSPS allows you to build up a supplementary pension and pay less tax and possible less social contributions.

IPA 

Do you have a company? In this case, an IPA is an absolute must. Why? Find the answer here. An IPA is also interesting as it allows you to invest in a branch 23 policy and benefit from the flourishing stock market. You may therefore combine two important advantages: less company taxes and a potentially higher return. Your broker will be able to find a solution which is adapted to your profile as an investor.

A big advantage of an IPA, compared with a PSPS, is that there is the possibility of a backservice. This allows you to make up for an unused tax margin in the past. 

PCS

If you do not have a company, but are a sole-proprietor business, you cannot take out an IPA. You can however opt for a Pension Commitment for the Self-employed (PCS). The premiums which you pay in this case provide you with a tax benefit of 30%. In this article on the Pension Commitment for the Self-employed (PCS), you will find out why it is worthwhile and what sort of tax benefit you can expect.

If you are a self-employed person without a company, you should find out whether it is best for you to take out a PSPS, a PCS or both. You can find out more in this article.

PENSION SAVINGS 

A pension savings plan is the classic way to save for a supplementary pension in our country, and a self-employed person may do so in the same way as a private individual. You can also invest in a branch 23 policy, with a potentially higher return.

For this year (the 2020 taxation year), you have two options:

  • Either you opt for the classic pension savings plan: the payments allowing a tax benefit are capped at €980. The tax credit is calculated at the uniform rate of 30% (+ municipal taxes);
  • Or you opt for the new plan: you can pay up to €1,260. You will receive a tax benefit of 25%(+ municipal taxes).

LONG-TERM SAVINGS 

A long-term savings plan is also available to self-employed people, with a ceiling set at €2,350 for 2019 (2020 fiscal year), and a tax benefit of 30%. Note that the housing bonus amounts (if it still applies) are deducted first in order to determine the amount which is taken into account for federal long-term savings. For further information, see this article.


Every self-employed person should consider a PSPS. Discover the range of products at NN.