How to optimize your retirement provision. Unit-linked annuity insurance is becoming more popular, also because the potential for returns is convincing in the current market environment. The public presentation often neglects what other advantages they have. With unit-linked pension insurance, the name says it all: the pension contributions are invested in investment funds. The larger the equity component, the higher the potential for returns. It is true that this also increases the risk of price fluctuations.
But that has nothing to do with the persistently low-interest-rate environment that is currently causing problems for classic, guaranteed interest policies. The unit-linked variant, like other retirement provision products, has other, sometimes too little-known advantages:
- TAX BENEFITS: While investors who save directly in equity funds have to pay tax on dividends or realized price gains when switching funds – selling units in the previous fund and buying the new one – the income from unit-linked pension insurance remains tax-free during the savings phase. The compound interest effect is entirely significant. When they are paid out, the insured also receives a tax bonus if their insurance contract has been in effect for at least twelve years. In this case, they only have to tax half of the income at their tax rate. This is usually significantly lower at retirement age than in working life. Anyone who chooses a lifelong annuity payment instead of a lump-sum payment only needs to set the income portion of the monthly payment, which is dependent on the retirement age, at their tax rate.
- LIFELONG ACHIEVEMENTS: Insurance coverage is another argument in favour of unit-linked pension insurance. “On average, people are getting older. Many underestimate their need for financial security. This is precisely where the insurance comes into play: If you choose to pay a pension, the payments are made from the agreed start of the pension – and for life, “says Miriam Michelsen.
- ALL-ROUND SUPPORT: The closer you get to the start of retirement, the more critical it is to protect the contract credit you have already earned against possible exchange rate losses. Therefore, it can make sense to replace a riskier asset class like stocks with lower risk asset classes like bonds. If requested, the insurer will undertake the corresponding reallocation of the contract balance into lower-risk funds for the customer. This means that they do not have to follow developments in the markets themselves but can leave that to the professionals.