Saving & investing
Reinvesting pension capital
At the moment your pension capital is paid out, you face a new question: what do you do with that amount? Leaving it in a savings account is rarely the best choice. Advantages that a classic bank investment has to do without.
- Who we help
- Those who have their second pillar paid out upon retirement and want to make the capital generate returns or pass it on.
- The tax benefit
- The right structure is linked to estate planning and your family situation.
Risks
With Branch 23, the capital and the return are not guaranteed. Your return is determined by the performance of the funds within your contract. It therefore depends on the fluctuations of the stock market. Important: the insurance company offers no capital guarantee nor any guarantee on the return of the Branch 23 component. It is consequently possible that the policyholder gets back less than their initial investment. The financial risk linked to the Branch 23 contract is borne entirely by the policyholder. There is no entitlement to profit sharing.
- Solvency risk: the life insurance contracts form, per segregated fund, a special estate that is managed separately within the insurer's assets. In the event of bankruptcy of the insurer, this special estate is reserved as a priority for meeting the obligations towards the policyholders and/or the beneficiaries
- Market risk: risk of loss that can be caused by price fluctuations of financial instruments in a portfolio
- Liquidity risk: risk of loss that arises when unfavourable market conditions affect the ability to sell (illiquid) assets when needed
- Interest rate risk: risk of loss as a result of changes in interest rates on the valuation of financial instruments in a portfolio
- Credit risk: the risk that a borrower does not repay their loan (in full), which can result in a loss on the value of the portfolio
- Exchange rate risk: risk that can arise as a result of fluctuations in exchange rates on the valuation of financial instruments in a portfolio
- Political risk: the value of an investment falls because of instability or political changes in the country or countries where this investment is made
- Operational risk: risk of direct or indirect loss as a result of inadequate or failing processes relating to the determination of the net asset value of a portfolio
What is an investment insurance policy?
An investment insurance policy means that you make an investment with an insurer and not with a bank. Instead of a securities account with a bank, you then take out a contract with an insurance company. In this contract it is set out, for example, that your invested sum is invested, by way of example, across 5 different funds, for the rest of your life or until you withdraw the money again. You will notice that there is little economic difference from a securities deposit at a bank, but legally, fiscally and in terms of estate planning an insurance contract offers numerous advantages.
What's in a name: '4th pillar insurance', 'free savings' or 'non tax contract'?
An investment insurance policy is also often called a non tax contract, or a 4th pillar insurance. These are terms that refer to the same type of insurance.
- The 4th pillar indicates that this is the last supplementary pension pillar, namely the pillar you have to provide for yourself
- The term 'free savings' then refers to the fact that, as an investor, you take on no obligation to make regular payments, as is often the case with a tax policy
- The term non tax contract indicates that the premium you pay (your investment, in other words) is not deducted for tax anywhere, and that you are therefore not taxed on the result of this investment either
What is the purpose of an investment insurance policy in which you reinvest your capital from the group insurance or individual pension commitment?
1. Preserving purchasing power over the long term
The average retirement age is 63. The average life expectancy is 83. That means we have to try to maintain the value of your savings for an average of 20 years. Your standard of living, inflation and the chosen investment profile with its associated return will determine whether the invested amount will last you over the long term.
2. Gaining peace of mind
Because you know that your money is placed with a reliable financial partner. Where you regularly receive an update, or request one yourself, and where the costs are clearly agreed.
3. Not putting it off
Being able to make decisions now, and nonetheless keep control over your money in the long term. A reinvestment insurance policy is typically taken out for life or up to a final age of 120 years, which essentially amounts to the same thing.
4. Ensuring super diversification of your investment
Based on your investment profile and on our knowledge of the insurance companies' products and the funds included in them, Life Experts will make a proposal that not only matches your profile, but also diversifies your invested money across the maximum number of funds allowed by the insurer, and possibly even across several insurers.
5. Relying on follow up by real people
Life Experts does not carry out active or daily follow up of your investment for you; if we have handled the points above well, that is not necessary either, but our company and its staff are ready to assist you or your next of kin with advice and support.
What in the event of death?
The concrete arrangement of this scenario is always tailor made, based on a calculation of the potential inheritance tax. You can, for example, ensure that one or more beneficiaries are designated in your contract. Those beneficiaries can also accept their beneficiary status, which can have advantages.
What if I want to withdraw my reinvestment insurance?
Depending on how the policy was structured at the outset, you can always withdraw your money in whole or in part. We call that 'surrendering' in insurance jargon.
- This can be on demand: for example, you wish to withdraw 2,500 euro
- This can be automatic: for example, you wish to withdraw 3,000 euro every quarter
What if the stock market fluctuates strongly after I have reinvested my pension capital?
No one can time the stock market exactly. That is why it is said that 'time in the market' is more important than 'timing the market'. Fortunately, your investment insurance policy can be 'programmed' in advance, so that you can invest with relative peace of mind in funds that also hold equity positions.
Dripfeed
At the start or with a large payment, we can provide a so called automatic dripfeed in your contract. This way you start your investment now, but the insurer ensures that, over 12 to 24 months, your money is invested drop by drop into the fund combination you have chosen. This fully automatically simulates a regular monthly investment for your one off investment. And you can read here why this is a good thing.
Rebalancing
A rebalancing can also be provided during the term. This ensures that your investment always matches your original choice. When the value of one of the chosen funds deviates strongly from your chosen allocation, a transfer is carried out to return to the original allocation.
Dynamic stop loss
Finally, a dynamic stop loss can also be built in during the term. This limits your losses. Suppose the decrease in value on a particular fund amounts to 20%, then the balance of that fund is transferred to a low risk monetary fund.
Can my children or grandchildren play a role in this investment insurance policy?
That is possible. It depends entirely on you. They can have an active role (as policyholder after a gift, for example), or a passive role (as beneficiary), or a semi passive role (as accepting beneficiary). Each scenario has its advantages and disadvantages, which Life Experts can explain to you.
What is the tax treatment of an investment insurance policy?
For the Branch 23 component you pay no withholding tax. There is a premium tax of 2% for individuals. Occasional commercial promotions by insurers sometimes mean that this 2% tax is borne by the insurer. Ask your Life Experts adviser about this.
What are the costs of an investment insurance policy?
There is an entry cost on the premium for the company and Life Experts combined. The exit costs are often limited, in the sense that there are often no exit costs if the sum of the surrender amounts is not greater than 10% of the value of the contract. And with a number of insurers you pay exit costs of 4.8%, which, however, decrease by 0.1% per elapsed month, counting from the entry into force of the contract. That means that from the 5th year there are no more exit costs. These costs are very competitive compared to a classic bank offering.
Does this fit your situation?
You will get an honest answer, even if that answer is "no".
Disclaimer: Life Experts provides insurance solutions for self-employed directors, liberal professions, SMEs and large companies. You will find the basic information for each type of solution on this website. With the product descriptions and the product overview on this website, we do not aim to follow a tax or legal classification, but a pragmatic and practical one. A turnover insurance, for instance, is fiscally a company-director insurance. And a death cover or a disability insurance can be taken out within the tax regimes of IPT, VAPZ, POZ, long-term saving, pension saving, and so on.