Three ways to pay yourself an annuity
You have several options for paying yourself a (life) annuity each month. This is certainly a very interesting idea given the sharp drop in your income once you reach retirement age. But not all income solutions are alike. So think carefully before you make your choice.
You want to be able to enjoy your retirement, but unfortunately, "quality time" has a price. You have some money saved, but you obviously do not know how many more years you will live. Not to mention that life is becoming more and more expensive. So how can you avoid depleting all of your savings too soon? An annuity product can be a solution.
In general, we can distinguish three types of annuity product:
- temporary life annuity
- lifetime annuity
- next generation lifetime annuity
Temporary life annuity
In this case, you invest a certain amount for a predefined period (for example, eight years and one day for tax reasons). In exchange, you receive a certain pension each month. At the end of this period, you will get back part of your investment, which you can then invest again in the same way.
Note that if you die before the maturity date of your investment, the balance will then revert to the insurer. Your loved ones will not receive anything. Another disadvantage is that the annuity paid is taxable, with 3% of the invested capital being taxable at 30% (+ your municipal tax) as income from movable property. This must therefore be included in the tax return. This is an important difference with respect to an NN annuity product, where only the increase in the annuity is taxed.
Lifetime annuity
If you choose a lifetime annuity, the system will be the same as for the temporary annuity: you invest a certain amount and receive a pension each month, until your death in this case. If you die, nothing will be paid to your loved ones. Here too, you will have to declare the pension to the tax authorities. You cannot terminate the contract.
Next generation lifetime annuity
For this type of life annuity, you enter into a contract until your death, but can revoke it (via a surrender of your contract). The lifetime annuity is in this case combined with branch 23 insurance (linked to an investment fund). You receive a lifetime annuity which can be increased over time if the results of the underlying investment funds are good and if your reserve has grown. For some insurers such as NN, the annuity cannot be reduced, which is a welcome security.
You also benefit from two other very important advantages:
- You do not have to declare the initial pension. This is tax-exempt. Only in the event of an increase in the pension will the difference between the new pension and the initial pension be taxed at 30% (plus additional percentages).
- Ifyou die, your lovedones will receive the balance of the possible available reserve of the contract.
Summary table
|
|
Lifetime annuity |
Temporary life annuity |
Next generation life annuity |
|---|---|---|---|
|
Periodic pension |
The initial annuity is guaranteed |
The initial annuity is guaranteed |
The initial annuity is guaranteed |
|
Pension increase |
Generally not provided for |
Generally not provided for |
The guaranteed amount will be increased if the underlying fund performs well |
|
Duration |
For life: the contract runs until your death (impossible to terminate) |
Fixed term (often 8 years + 1 day or 1 month for tax reasons) |
Until your death, but it is possible to terminate it during its term |
|
Reserve in the event of death |
Completely lost; your heirs receive nothing upon your death. |
If you take out successive contracts, you receive a little from your investment at each extension. In the event of death, your heirs receive nothing. |
Upon your death, your heirs receive the available reserve, but without any guarantee as to the amount, which depends on the evolution of the underlying portfolio and the amounts already paid. |
Do youhave any further questions?
Your insurance broker will tell you everything you need to know about the various possible life annuity solutions. Find out here how NN can provide you with a life annuity.
