Savings insurances (Branch 21) are life insurances which offer constant capital protection (excluding charges and taxes). The return consists of a guaranteed rate and an optional and variable beneficial interest (or bonus) from one year to the next. The guaranteed rate applies to each payment for a determined term (in general 8 years and 1 month). It varies between 0% (capital protection) and 3.75% (maximum legal rate currently in force). The granting of a bonus may be subject to conditions.
You determine the term of your investment and the amount that you want to invest (a minimum may however be required). You can opt for a single payment or periodic payments that are scheduled or not. Each new payment will be subject to entry charges (reduced at VDV Conseil), as well as the 2% tax applicable from 01/01/2013. You may also decide to make withdrawals, partially or in full, whenever you like. Exit fees may however be deducted (generally, in the first few years of the contract) and some insurers reserve the right to claim an additional exit indemnity in specific circumstances. Finally, a few insurers claim management fees every year. For more information regarding charges, we invite you to refer to the product financial information sheet (available on this website).
You will not pay withholding tax if the term of your investment, at the time of withdrawal, exceeds 8 years, or if you have taken out simultaneously a death insurance guaranteeing 130% of your capital. In other cases, your investment income will be subject to a withholding tax (currently 30%). The sum total of interest resulting from the capitalisation of payments at an interest rate of 4.75%, is considered as income.
The capital amount is paid to the designated beneficiary should they be living at expiry of the contract.
In the event of death before the contract expires, the capital amount is paid to the designated beneficiary.
When to choose a savings insurance?
Savings insurances and savings accounts often compete. In fact, they tend to be complementary. The savings account is flexible. You can withdraw your money at any time and at no cost. On the other hand, it offers a limited return. Savings insurance is less flexible, particularly because of the charges and taxes which weigh down on the return in the first few years. However in the long run, it offers noticeable additional returns compared to savings accounts.
In practical terms, the savings account is particularly suitable for precautionary savings that you wish to keep within reach, or if your investment horizon does not exceed a few years. If however you have many years ahead of you (at least 5 to 8 years) and you are looking for a risk-free investment, it would be better to opt for a savings insurance.
Which savings insurance?
Two different types of savings insurances are usually distinguished. Firstly, there are those which offer a guaranteed minimum rate (at the moment, this is generally between 0.01 and 1.00%). These insurances will be interesting to those investors who want the certainty that every year they will receive a little something. Secondly, in the other group we find insurances that only provide capital protection. We then speak of insurances that offer a guaranteed rate of 0%. The return thus depends entirely on the bonus that will be awarded. If this is nil, then you will get nothing. This scenario cannot be excluded in any one year, but in return for this risk you can expect to be compensated in the long run by a higher return.