Early access to occupational pension plans: Belgium vs USA. Borrowing, pledging, hardship withdrawal or early distribution

In: European journal of social security, Volume 19, Issue 2, p. 186-206

Abstract

Occupational pension plans help people to maintain their living standards after retirement. This article looks at differences in the design of occupational pensions in Belgium and the USA, and more specifically, at early access. The article shows that different cultural backgrounds influence occupational pension systems. Occupational pension plans are intended to provide retirement income, and assets should therefore not be used for non-retirement purposes such as holidays Credit card debts. However, both Belgium and the USA provide mechanisms for early access. In Belgium, early access to an occupational pension plan is, in principle, prohibited. The only exception is for the purchase of real estate since this fits within the Belgian pension philosophy that retirees should not have to spend any of their retirement income on rent. It is culturally established that pensions and house ownership are inter-connected. In the USA, early access is not prohibited but it is often discouraged. Leakages from occupational pension plans must be limited, but some flexibility needs to remain. Since participation in occupational pension plans ought to be encouraged, (too many) restrictions on access may discourage individuals from making contributions to those plans. This is the reason why there is greater flexibility towards early take up in the American private pension system.