In today’s environment, where talent retention is a major challenge, many employers are seeking effective levers to build loyalty among their key employees. The Individual Pension Commitment (IPC) fits within this strategy: it allows an employer to grant a specific employee an additional supplementary pension, on top of the collective pension plan already in place within the company.
The FSMA (Financial Services and Markets Authority) has recently imposed significant sanctions on several employers who had unlawfully granted IPCs to certain employees approaching retirement. It is therefore useful to revisit the conditions governing the granting of IPCs.
- Legal conditions: a strictly regulated framework
The IPC attracts many employers because, unlike collective pension plans, it offers greater flexibility in setting the amount, conditions, and payment of the supplementary pension for specific employees.
However, IPCs are subject to strict legal conditions designed to ensure fairness and compliance:
- Existing collective plan: An IPC may only be granted if the company already has a collective pension plan covering all employees. It cannot replace a collective plan but only supplement it.
- Occasional and individual: The granting of an IPC must be occasional and not systematic. The benefit should, in principle, be awarded to a clearly identified employee for reasons specific to that individual. If multiple employees within the same category receive IPCs, the arrangement may be considered a collective pension plan, in which case the employer would need to comply with the applicable rules.
- Timing restriction: An IPC cannot be granted within 36 months preceding retirement or the commencement of an early retirement scheme (unemployment with company supplement).
- Formal agreement: Any pension commitment must be governed by a pension regulation or a pension agreement.
For employers, contributions under an IPC are deductible as business expenses, provided the following conditions are met:
- compliance with the 80% tax rule; and
- compliance with an annual tax deduction ceiling specific to IPCs. For assessment year 2026, this ceiling amounts to 3,060 EUR.
The FSMA actively monitors compliance with the rules applicable to IPCs. Failure to comply with these conditions may result in criminal, administrative, and tax penalties.
A useful but cautious instrument
The IPC is therefore an effective motivational tool for retaining a key employee, while offering tax advantages to the company. However, its use requires a thorough understanding of the applicable legal and tax framework.
