Camille Van Vyve
02 Feb 2023
How to best invest your group insurance?
For many future retirees, group insurance is both a tranquilizer and anxiolytic: being able to count on this additional pension is a chance, but will it be enough? How to invest it to obtain the most comfortable annuity without taking reckless risks? Easyvest helps you develop the most rational strategy possible.
What is group insurance?
Group insurance is a life insurance contract taken out by an employer in favor of all or part of its employees. The purpose of this contract is to provide them with additional capital upon their retirement.
When can you receive group insurance?
The law requires that the supplementary pension plan be liquidated at the earliest when the effective legal pension is taken, regardless of the expiry date stipulated on the insurance policies taken out. However, two cases can be exceptions to this rule:
- the worker who wishes to work beyond the legal retirement age is authorized to liquidate his supplementary pension plan as soon as this legal age is reached
- the worker who has not reached the legal retirement age but who meets the conditions of age and career time necessary to take early retirement may, even if he decides to continue working, liquidate his pension plan
In what form is it paid?
The benefits guaranteed by the group insurance can be paid all at once in the form of a single lump sum, or in the form of an annuity. The most common way is capital liquidation, so that the beneficiary can immediately dispose of the entire pension plan. This form of allocation is also the most advantageous from a tax point of view.
Taxation of group insurance in the form of a single capital
When the group insurance is liquidated in the form of capital at the legal retirement age or after a full career, the contributions paid are taxed at 10%. To this are added deductions of a social nature: the health care contribution of 3,55% and the solidarity contribution of 2%. If the capital is paid in advance, the taxation of employer contributions increases and can even reach 20% when it is paid at age 60. So better think twice before taking early retirement.
Don't delay too long
Given the current level of inflation, there is no question of leaving the fruit of your group insurance to sleep in a savings account: over time, the purchasing power corresponding to these amounts would be seriously eroded, which will probably not be the case of your aspirations and your needs. In addition, through the phenomenon of compound interest, a year without a return will have significant long-term consequences since these returns will not be reinvested each year. Thus, a capital of 250.000€ invested in stocks for 19 years rather than 20 years will imply a loss of earnings of potentially more than 50.000€ at the end of the period.
Don't make it too complicated
For most of us, retirement is seen as a time to enjoy life and those close to us. If you are not an experienced investor, investing the capital of your group insurance by yourself may be stressful and time-consuming. Set your goals and get advice on developing the best strategy. When choosing the manager, pay close attention to fees, as these can make a huge difference to the final return. The passive investment strategy offered by easyvest has the double advantage of transparency and one of the lowest prices on the market.
Don't take too much risk
The wordsshare of risky assets in your portfolio should change according to the phase of your planning. At retirement, it is recommended to build up your portfolio of around 40% less risky assets by investing, for example, in a tracker of European government bonds, and to gradually increase this proportion until the end of the investment horizon. This will preserve your capital and guarantee a stable pension throughout your pension.
Secure a regular income
In the structuring of your portfolio, it is recommended to provide for the payment of an annuity, in order to be able to benefit from a regular income. This annuity will not be subject to personal income tax. Only the usual financial taxes (TST, withholding tax, tax on investment accounts) will be due.
Easyvest annuity portfolios
Many clients have already opted for easyvest's annuity portfolios, which allow capital to be invested in order to obtain a fixed (or indexed) monthly income, possibly with a long-term succession planning objective on the side. This is an excellent, tax-efficient formula for investing the benefits of group insurance. The passive investment strategy, which is the hallmark of easyvest, makes it possible to obtain market returns at lower cost and is unbeatable over the long term. Our advisers are at your disposal to best structure this type of portfolio, according to your personal objectives.