Group insurance: are you more of a single payment or a “win for life”?

Group insurance allows you, through your employer, to build up savings that will be used to supplement your statutory pension. Hence its name “supplementary pension”. When you have reached the legal pension age, you will therefore be able to use the capital thus saved. You can get paid for it all at once or little by little, in order to periodically receive additional income – a “win for life” in a way.

From a tax point of viewthe differences between the two modes of distribution mean that the payment of the capital in one go is more interesting. The Minister of Finance, Vincent Van Peteghem (CD&V), also pleads in the presentation note of his tax reform project for the abolition of this preferential treatment.

Can I choose the payment method for my group insurance?

The rule of a group insurance determines whether your policy will be paid out at once (we then speak of a capital payment) – or little by little until your death (this is then an annuity).

“If the pension regulations provide for a single payment, you have the right, as an employee, to convert the capital into a pension. But only a small minority of workers use this option”, points out Barbara Van Speybroeck, the door -word of the federation of insurers, Assuralia. No less than 90% of employees choose to receive their supplementary pension in one goi.e. all the capital saved.

If your insurance allows the payment of an annuity, the regulations stipulate the regularity of its payment. “Usually, it is monthly or quarterly“, specifies Laurence Gijs, spokesperson for the insurer AG Insurance.

“If the group insurance provides for a capital payment and you then choose to convert to a lifetime annuity, you can determine yourself – again, if the rules allow it – the frequency of payment of the annuity“, adds Jérémie Cuvelier of the company Axa. “The settlement often provides for a monthly payment.

How will your group insurance be taxed?

Your pension file, which indicates the state of progress of the constitution of your supplementary pension, also specifies what will be the height of your savings at the end of the contract. Note: these are gross amounts. When your supplementary pension is paid, taxes and social security contributions will have been deducted beforehand.

The gross capital constituted (including profit sharing) will first be reduced by a INAMI contribution (3.55%) and one solidarity contribution (from 0 to 2%). Then, on the gross amount (excluding profit sharing and after deduction of the aforementioned contributions), a withholding tax which depends on the age at which you will receive the capital and the nature of the contributions which will have financed your supplementary pension (personal or employer contributions).

Concretely, you will pay on the capital constituted with personal contributions a tax (additional cents included) 10.09% (for contributions paid from 1993) or 16.66% (for contributions paid before 1993). On the capital built up with employer contributions, you will pay a tax which can vary between 10 and 20%.

All deductions (INAMI contribution, solidarity contribution and final tax via withholding tax) are withheld by the insurer.

The following year, you must indicate on your tax return the net amount that will have been paid into your account and the withholding tax deducted. “On this basis, a final count will be drawn up”, specifies Barbara Van Speybroeck.

  • Periodic annuity payment:

Here too, the gross capital constituted (including the profit sharing) will first be amputated by a INAMI contribution (3.55%) and one solidarity contribution (from 0 to 2%). And the withholding tax will be withheld from each periodic payment. Each year, you must indicate the pension received on your tax return. This income will be taxed at a progressive rate (such as that provided for personal income tax).

  • Single payment, then converted into an annuity:

Your capital will first be taxed as we describe in point 1. Then the net amount will be converted into a pension, which you will also have to indicate on your annual tax return. “The tax base will then be a lump sum of 3% of the original net capital, from which a withholding tax of 30%plus municipal taxes”, explains Jérémie Cuvelier.

In concrete terms, what additional monthly amount could I count on in the case of an annuity payment?

A person who has saved a net capital of 100,000 euros can count, according to AG Insurance, on a monthly pension of 411 to 471 euros.

A net capital of 100,000 euros yields a monthly pension of 471 euros from the age of 65 for a man or 411 euros from the age of 65 for a woman, according to a simulation by AG Insurance.

The amount of the annuity depends on the estimated life expectancy and a guaranteed interest rate of 1.75%.

What happens if I choose an annuity payment and I die quickly?

In principle, the periodic pension is paid throughout the life of the beneficiary. In other words: until you die. In the regulations of the group insurance, it can be stipulated that the monthly pension will be transferred – and will therefore continue to be paid – to the surviving spouseuntil he died.

“A transferable annuity which is paid from one and the same capital will however be a little lower than a non-transferable annuity, because it will have to be paid longer from the same capital”, specifies Laurence Gijs.

And if you live longer than the estimated life expectancy that was used as the basis for the insurer’s calculation, the annuity will continue to be paid as well.

Is the annuity payment indexed?

Since the skyrocketing inflation, you may be wondering. “In the pension regulations, it can be stipulated that the annuity will be indexed at a fixed rate”, specifies Jérémie Cuvelier. “But an annuity that automatically follows inflation is not possible.”

“It goes without saying thatan indexed annuity is more expensive“, observes Laurence Gijs. The annuity will therefore be lower at the start of the payment than the amount you would receive in the case of a fixed payment.

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