By Arun Muralidhar

A commonly-accepted retirement goal for a healthy pension is for it to sustain the relatively higher standard-of-living of the latter part of one’s working life throughout retirement. A recent innovation implemented by Brazil in January 2023 might provide a solution to the pension challenges faced by Belgium, and more importantly, satisfy the key goals identified by Belgium Government. We recommend Belgium create and issue an innovative new bond – SPECial ULtra-long Obligatie (PensiOen) Salarisstook (SPECULOOS), known previously as SeLFIES. The SPECULOOS bond is a single, simple, liquid, low-cost, relatively low-risk (government-issued) instrument, easy-to-understand for even the most financially unsophisticated individual, because it matches the desired real retirement income profile of individuals and embeds accumulation, decumulation, compounding and inflation-adjustments. Brazil launched RendA+, through Treasury with a simple two-question app and digitalization has led to financial inclusion and potentially improving gender equality. It can be purchased/sold in slices as small as $5/time. This instrument is a win-win-win for the government, citizens and the financial services industry, especially since Belgium has a system focused on guaranteed returns (unlikely to ensure guaranteed real retirement income) and a high level of financial literacy. Moreover, with high levels of homeownership we show how SPECULOOS can serve as “currency for retirement” and foster better retirement outcomes.

Source SSRN