Branch 23

 

Insurance funds (Branch 23) are investments whose return is linked to that of one or several investment funds. We thus have insurance funds that are specialised in shares, bonds, liquid assets or several of these products at once. By taking out an insurance fund you therefore invest, indirectly, in the Stock Market. This means that insurance funds provide neither capital protection nor a guaranteed return. The risk rests entirely on the investor. However in the long run, these products also offer attractive return prospects, albeit with no guarantee! Insurance funds are therefore aimed at the well-informed who accept to see their holdings fluctuate (sometimes substantially so) and who have many years ahead of them (at least 7 to 10 years).

You can usually make payments and withdrawals whenever you like. Each new payment will be subject to entry charges (reduced at VDV Conseil), as well as the 2% tax applicable from 01/01/2013. In the event of a withdrawal, many insurers will charge exit fees during the first few years of the contract. Some insurers also charge management fees every year. For more detailed information regarding charges, we invite you to refer to the product financial-information sheet (available on this website). In the absence of a guaranteed return, income is not subject to withholding tax.

Different risk profiles

Depending on your age, expectations, nature, family circumstances, the importance of your capital, and even according to your goals, plans or needs in the short or longer term, we can advise you on personalised investment plans that match the level of risk that suits you:

  • Defensive funds : you invest mainly in bonds (75%) and less in shares.
  • Neutral funds : you invest in equal parts in shares (50%) and bonds (50%).
  • Aggressive funds : you invest mainly in shares (more than 75%).

In the long-term (at least 10 years), we advise you to invest in an equity fund as the return on shares is often greater than that of bonds funds.

Note: :

All the plans described can be combined. In this way, you can most certainly combine a guaranteed rate plan (which guarantees your basic investment) with a more risky solution which, in the long run, can offer very attractive return prospects.

There are also Branch 23 products where the capital amount is guaranteed at the end; we thus refer to structured funds. The subscription period of these products is limited; they generally guarantee a minimum of 100% of your net investment; to this minimum will be added a bonus, the expected level of which will often be linked to changes in a basket of shares or stock market index, or even to changes in one or more well-determined business sector(s).

Their life span often varies between 3 to 10 years. Some of these funds are based on a capitalisation formula, while others (less frequent) provide for the distribution of a “coupon”.

These investment products therefore enable you to invest in the Stock Market without taking the slightest risk, since your initial outlay is guaranteed regardless. You benefit from the rise in markets without being penalised by a sudden correction in prices.

Is it possible to plan one’s estate with insurance products?

The answer is yes.
An important advantage of Branches 21 and 23, is that they offer certain benefits within the framework of estate planning.
The amounts that were given to children beforehand can be invested by them in a life insurance, such that you may keep some form of control over how they will use it before your death or the end of the insurance contract.

For instance, through the Branch 23 system.
To explain briefly: Branch 23 is a life insurance whose premiums are paid into an investment fund.
Let’s suppose a father wants to give a substantial sum of money to his son.
The son invests the sum of money received in a Branch 23.
In the present case, the son is the insurance policy-holder and designates his father as the insured, in other words, the person on whom the risks rests. And of course, the son designates himself as beneficiary. At the time of the father’s death, no inheritance tax is due if the father dies at least 3 years after making the donation, or if the donation is made by way of a notarial deed in Belgium.

Basically, you can avoid inheritance taxes by proceeding with a manual gift or a notarial donation of movable property. This last type of donation requires the payment of reduced gift taxes, but no inheritance tax will be payable should the father die within 3 years of making the donation.
In order to avoid any hassles, it is best to keep proof of the date of donation.
This is an example, but other types of agreements are possible.

Tax legislation

Following the new tax legislation, a 2% tax was established from 01/01/2013 on premiums paid for an individual life insurance. This new system concerns Branch 21 and Branch 23 insurances taken out by physical persons and for which the risk is located in Belgium. Retirement-savings type contracts are expressly exempt. The total premium amount (including all charges) acts as the basis for tax.