Pension
Long-term savings
Long term savings is a tax saving formula for any individual who still has budgetary room on top of pension savings. You set aside an amount every year for at least ten years.
- Who we help
- Individuals with sufficient taxable income who want to save extra on a tax advantaged basis on top of their pension savings.
- The tax benefit
- 30% tax advantage in personal income tax on the premium paid.
What is long term savings?
With a long term savings life insurance policy, you benefit from a tax advantage in personal income tax of 30% on the saved premium. That counts. Depending on your Net Taxable Income, you can also pay in up to 2,350 euro per year (2023 figures) into this tax attractive savings solution. That means you can save more than 2 times as much as through ordinary, widely used pension savings. Long term savings is, however, somewhat less popular than pension savings, for 3 reasons:
- Pension savings is slightly more tax advantageous than long term savings, so it is better to do pension savings first and only then, if you still have savings capacity left, top up your tax basket with the long term savings premium
- The long term savings premium also used to be combined, in certain situations, with tax deductible loan repayments, which meant the premium you could save varied from year to year depending on how much capital was paid off
- Finally, calculating the maximum deductible premium is, in some situations, guesswork: you have to make a payment before 31 December to secure the deduction for the current income year, whereas the Net Taxable Income on which the maximum premium is based is only really known at the personal income tax return a few months later in the assessment year
Who is it for?
Long term savings is taken out by an individual with a sufficiently high income, since the premium you can pay in depends on your Net Taxable Income. A second condition is that you, as an individual, still have sufficient savings capacity. We think in particular of people whose loan is coming to an end, freeing up extra monthly budget. But those who still have a loan running, perhaps even do pension savings, and have extra savings capacity left, will often opt for additional pension capital through long term savings.
Self employed without a company
The self employed without a company, who cannot take out an IPT (an individual pension commitment funded by your company), can choose between a VAPZ (the free supplementary pension for the self-employed), pension savings, and POZ (the pension agreement for the self-employed without a company) and indeed, long term savings too. Plenty of choice, and our experts are happy to help you.
Retired self employed
Retired self employed people who have their 2nd pillar contracts paid out upon retirement can also benefit from long term savings. Thanks to the possibility of unlimited additional earnings after retirement, and any other sources of income after retirement, long term savings can still generate an extra tax deduction on that increased income.
Retired civil servants and employees
Finally, retired civil servants or employees with a (relatively) high pension may also obtain a tax deduction through long term savings even after retirement.
Tip 2: long term savings after your 65th too?
Besides the higher premium that can be saved, long term savings has the great advantage that it can continue to generate a tax advantage even after your 65th. That is why it is best to set '99 years' as the end date in your contract. Unlike pension savings, long term savings premiums will still generate a 30% tax advantage even after 65.
Tip 3: property tax rules and long term savings, no longer a tangle
With the complete abolition in Flanders of the tax advantage for new capital repayments and interest payments from 2020, anyone with a recent loan can now also benefit from the tax advantage within long term savings.
Tip 4: take out your long term savings before the age of 55
Then you benefit from taxation at age 60, while the premiums you pay in after your 60th still enjoy the 30% tax advantage in personal income tax. At the same time, the capital built up by those last premiums is no longer taxed at the end date of the contract.
What is the tax treatment of long term savings?
As mentioned, the premium gives a tax advantage of 30% (plus municipal taxes). This is the same as pension savings. Someone who can save up to 2,350.00 EUR, for example (2021 figures), will get 705.00 EUR back through taxes the following year. Unlike pension savings, a tax of 2% is deducted from the premium, and at the end date the saved amount is taxed at 10% on the 60th birthday (if the contract was taken out at the latest in the year you turn 54). If the long term savings is started at age 55 or later, the tax is levied on the 10th anniversary of the contract.
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.