Belgian defined benefit (DB) pension fund face potential closure as the country continues with its harmonisation of employment rights between blue and white-collar workers.

In 2011, the Belgian Constitutional Court deemed it illegal to offer different employment rights to blue and white-collar employees, in a leveling up of rights for the trade sector.

As new rules came into force at the start of 2014, pension arrangements were shelved as negotiations between employer and employee representatives continued.

In the coming weeks, the social partners are expected to publish their agreement, with the government swiftly accepting the proposals as law.

However, historical discrimination between Belgian workers generally resulted in occupational-DB arrangements for white-collar workers, and blue-collar either given no coverage or defined contribution (DC) schemes.

The social partners are to agree a transition period for the harmonisation of pensions rights, with employers potentially given 10 years to comply.

Elke Duden, counsel at law firm Linklaters in Belgium, said that, given the chance of blue-collar workers claiming for DB rights, and the unpalatable cost for employers, many DB schemes could close to new members.

Due to the cost of pensions reform, she said, employers in Belgium have become increasingly concerned with competitiveness against other European firms, thus moving for cheaper options.

While plans are yet to be published, the likelihood is that employers will be given 10 years to transition to equal blue and white-collar offerings.

“It is difficult to go into details, as we do not yet know what is expected, and it’s quite grey on the extent of the impact,” Duden said.

However, current Belgian legislation means employers cannot force current members of DB schemes to move into a lesser scheme.

With this being the case, Duden said she expected DB to duly shut to new members entirely, and that all new enrolment would move into an equal-footed DC scheme.

“What is likely is, employers will terminate all current pension schemes and put in pace new schemes for new hires that are equal for both blue and white-collar workers,” Duden said.

The other option, she said, would be for employers to provide the employee representatives with a plan that would see the leveling up of blue-collar benefits to match white-collar workers.

However, given the costs associated with this, it is far more likely for legacy benefits to be shut off entirely.

With this, Duden said, in effect, real harmonisation will not take place for around 40 years, as current members will remain in DB schemes, accruing benefits.

The legacy of blue-collar workers not receiving occupational pension benefits has been a sore point among trade unions for some time.

Earlier this year, the country celebrated its second-pillar system becoming larger than its third, as industry-wide pension schemes took hold.

In 2004, the Belgian government legislated for the formation of industry-wide schemes which created compulsory membership for uncovered workers, many of which were employed in blue-collar industries.

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