Belgian banks like KBC heavily promote their pension saving products as the solution to your retirement needs. And with a 30% tax reduction on your contributions, it seems like an obvious choice for planning your future.
Yet the uncomfortable truth is that pension saving alone will leave most people with a significant retirement gap. Even KBC's best-performing pension saving fund would only provide about €456 monthly income at retirement – before inflation takes its toll.
Let's explore what KBC's pension saving products actually offer, their limitations, and how you might need to complement them with more effective investment strategies to truly prepare for retirement.
KBC's pension saving products
KBC offers two types of pension saving products:
- Funds: Pricos Responsible Investing and Pricos Defensive Responsible Investing
- Branch 21 pension saving insurance plan: KBC Home & Pension Plan
The Pricos funds are investment funds designed for pension saving. You make consistent contributions to the fund. They are then invested in shares, bonds, and other financial assets.
KBC Home & Pension Plan is set up as a branch 21 insurance plan (or "life insurance with a guaranteed return"). This product gives you a guaranteed return, supplemented by a possible profit-sharing scheme.
Review of the Pricos funds
KBC offers two versions of their Pricos pension saving funds: the standard Pricos Responsible Investing and the more conservative Pricos Defensive Responsible Investing.
Difference between Pricos Responsible Investing and Pricos Defensive Responsible Investing
Both funds focus on socially responsible investing. But the main difference is in the asset allocation. Pricos Responsible Investing invests a higher percentage of the assets in stocks, usually 55-65%. The rest, about 35-45%, goes into bonds and cash. This creates a more growth-oriented approach to investing your pension savings.
Pricos Defensive Responsible Investing has a lower equity allocation, usually 30-40%. It invests more in bonds, around 60-70%. This structure is more focused on capital preservation than on aggressive growth.
Historical performance
We can see this difference in investment strategy by looking at the past performance of the two Pricos funds. The Defensive fund shows lower volatility, but also a lower return in the long term:
When compared to other pension saving funds, the historical performance of the Pricos funds over the last 20 years has been pretty average:
Fees
The Pricos funds are on the pricier side. They have a high ongoing fee and entry fee:
Review of KBC Home & Pension Plan (insurance plan)
How your savings are invested
Your savings are in KBC Insurance's general investment portfolio. This portfolio mainly has fixed-income securities. These include government bonds, corporate bonds, and mortgages. This is a very conservative approach focused on capital preservation.
What's the insurance?
When you invest in a branch 21 product such as KBC's Home & Pension Plan, you are buying a life insurance policy that also has a savings component. It gives a death coverage to your beneficiaries if you die before the contract matures. Typically, your beneficiaries will receive the accumulated savings plus a small extra amount.
Branch 23 products also have an insurance component attached to them. This is a benefit, but also a downside because the insurance comes at a cost. However, KBC does not offer branch 23 products.
Historical returns
The current guaranteed rates are quite low, often under 2%. This makes it hard to build wealth, especially with inflation. For instance, in 2023, it offered a 2.25% return. But inflation was at 2.3%, meaning that your savings lost -0.05% in value. In contrast, the Pricos Responsible Investing fund returned 11.3% and the Defensive fund 8.3%.
Fees
The KBC Home & Pension Plan doesn't charge an ongoing fee. But there is a steep 5% entry fee for each contribution. So if you contribute €1,000, KBC will take €50 and only €950 will go towards your savings. Part of this cost is to cover the insurance attached to the plan.
Pension saving fund vs branch 21 insurance plan
Both types of products provide the fiscal advantage that comes with the pension saving scheme. But there are important differences:
Which suits you best?
The confusion is understandable - both products are offered under the same heading of "pension saving". But it is important for your financial future that you know the difference.
A pension saving fund may be better if:
- You are still young and have a long investment horizon.
- You are willing to take a greater risk for the chance of higher returns.
- You want more transparency and flexibility.
A branch 21 insurance plan may be better if:
- You prefer security rather than the possibility of higher returns.
- You are close to retirement age.
- You want to avoid any risks with your pension money.
Benefits of pension saving
There are two main benefits to the pension saving scheme:
- Tax advantage. If you put money into a pension saving plan, you get a 30% tax reduction on your contributions (but only up to certain limits).
- Behavioural benefit. Banks like KBC actively promote these products. In a way, this helps many Belgians build a pension nest egg. Without this, they might delay retirement planning or save inconsistently.
But, there are unfortunately quite a few drawbacks as well. Most importantly, it's most likely not enough to secure a good retirement.
Why pension saving likely not enough for a good pension
We ran a simulation to calculate how much pension saving yields at the age of 65, when the scheme ends. We take the example of a 30-year old who contributes €1,350 each year (the maximum yearly amount in 2025). We simulated each of the KBC products, using historical data to project into the future:
Even if we invest in the fund with the highest expected return, the Pricos Responsible Investing fund, we still only get a total of €100,046. This translates to a monthly income of €456, considering life expectancy in Belgium. On top of that, due to inflation, this will be worth a lot less than today. In real terms, this will only yield about €228 per month. It's a bonus, but hardly enough to live on.
Other downsides of pension saving
Additionally, there are a few downsides to the pension saving scheme that further reduce its attractiveness.
Your savings are locked up until the age of 60
You can withdraw the funds at an earlier age, but it comes at a severe 33% tax penalty. So, this option is not recommended.
Pension saving funds are expensive
The Pricos funds come with high ongoing fees. Meanwhile, the KBC Home & Pension Plan, which is a branch 21 product, has a hefty 5% entry fee. This is not specific to KBC though. Pension saving products tend to be very expensive. That's why banks and insurers are so aggressive in selling them 😉
You cannot save more than the maximum imposed by the state
If you want to save more than 1,350€ every year, you have to figure out a way to invest the excess amount through other means.
Secure your pension with ETF investing
So pension saving is not enough. What can we do then? At Curvo, we believe the solution is passive investing. This means investing with index-based funds and ETFs.
ETFs have a higher return
ETFs usually outperform pension saving funds, even though they don’t offer tax benefits. A global stock ETF tracking the MSCI World index has done better than both Pricos funds over the past 20 years:
There are several reasons why this is the case. ETFs have expense ratios that are much lower than those of pension saving funds. A typical global equity ETF charges about 0.2% each year. In contrast, pension saving funds like Pricos charge around 1.5%. This cost difference helps ETF investors keep more of their returns.
On top, pension saving funds have investment restrictions. These limits affect their performance when compared to ETFs. ETFs can invest fully in equities, while pension saving funds can only invest 75%. The rest goes into lower-yielding bonds and cash, which can hurt returns in strong markets. They can also mainly invest in European stocks. Only 20% can go outside the European Economic Area. This means they miss out on much of the strong performance of the US market in recent years. So pension saving funds lack exposure to the world's most dynamic economies and companies.
No limit to how much you can invest
ETFs let you invest as much as you want. Unlike pension saving funds, they don’t have contribution limits. ETFs fit your budget, whether you invest €5,000 or €50,000 in a year. They help you build wealth based on your own income and goals.
Superior diversification
Global equity ETFs give you great diversification. They let you invest in thousands of companies from different sectors and regions. One MSCI World or FTSE All-World ETF lets you own shares in over 1,500 to 3,000 companies all over the world. This range greatly lowers your risk. Most pension saving funds focus on European markets. At least 80% of their investments are in that region. They also have more exposure to fewer companies.
An ETF is a simple product
The straightforward nature of ETFs makes them simple to understand and manage. With a single share of an ETF, you own a slice of the global economy that automatically rebalances as companies grow or shrink. There's no need to analyse complex fee structures, understand insurance components, or decipher complicated product documentation.
Curvo, the easiest way to invest in ETFs
The difficulties of managing your own portfolio of ETFs
Choosing a single ETF is usually not the entire story when investing your life savings. Stocks are risky. Not everyone can handle their ups and downs. To bring success over the long term, you need to build a portfolio of ETFs that suits your goals, your appetite for risk and your capacity for taking risk. But this is not an easy task, as there are thousands of ETFs to choose from. And this portfolio of funds must stay balanced over time and adjust to changes in your life. On top of that, it's important to understand the tax implications of investing. When managing your own portfolio, these responsibilities fall onto you.
We saw most of our friends not investing because of these difficulties. They tried at first, but then they stopped. They didn’t trust themselves to make good financial choices for the future. Others couldn't bring themselves to learn the tax intricacies of investing. Yet, we believe that investing in ETFs or index funds is a powerful tool to improve our financial well-being. That's why we built Curvo: to take care of all the complexities of good investing so you don't have to worry.
Investing without hassle
Curvo addresses the challenges of managing your ETF investments yourself:
- Portfolio built for you. We ask you a few questions at the start to learn about you and your goals. Based on your answers, we match you with the best portfolio for you.
- Diversification. We firmly believe diversification lowers risk and boosts investment returns. That's why each portfolio consists of over 7,500 companies, diversified across sectors and countries.
- Invest sustainably. The Curvo portfolios follow one key rule: avoid companies that harm the planet. Sectors like non-renewable energy, vice products, weapons, and controversial companies are all excluded.
- Rebalancing is done for you. No need to worry about keeping your portfolio in balance.
- Fractional shares. All your money is invested. There’s no cash left sitting on the side.
- Automated monthly investing. Set up your monthly plan and get peace of mind that your money is working for you.
- Start from €50. There's no need for a large lump sum to get started.
- Project your savings into the future. The app allows you to see how much you can expect your portfolio to be worth in the future. You can ask questions like, “How will adding €50, €100, or €200 to my monthly savings affect my future?” This helps you imagine the “future you.”
- Withdraw anytime. There are no long-term contracts or exit fees if you wish to stop investing.
Conclusion
As we've seen, KBC's pension saving products offer some tax advantages but come with significant drawbacks. With high fees, limited investment options, and contribution caps, they're unlikely to provide the retirement income you need and deserve.
The reality is sobering: even maxing out your contributions to the best-performing Pricos fund would only give you about €228 monthly in today's money when you retire. Most of us need substantially more to maintain our lifestyle.
So what's the solution? ETF investing offers a compelling alternative with higher potential returns, unlimited contribution flexibility, and better diversification. And if you're concerned about the complexity of building and managing your own ETF portfolio, Curvo offers a simple solution that handles everything for you. We built Curvo specifically to address the challenges many Belgians face when trying to invest effectively for their future.
Don't settle for the limitations of traditional pension saving. Take the next step towards a more secure retirement.