A group insurance allows you to build up extra-legal savings in addition to your legal pension. Formally, it is a life insurance policy taken out by the employer for his staff. The accumulated capital can be paid in one go or in instalments. A choice that has consequences.
This summer, Finance Minister Vincent Van Peteghem (CD&V) announced his major tax reform project. In order to widen access to pension savings to all employees and to guarantee the viability of the system, it notably expressed its intention to gradually abolish the preferential treatment of group insurance payments in the form of capital. What to say? As a reminder, group insurance is this extra-legal pension taken out through your employer and which gives you access, at the time of your retirement, to a certain amount of capital. In principle, you can then request the payment of the capital in question in one go or in several installments. In the latter case, we will speak of a periodic annuity.
This summer, Finance Minister Vincent Van Peteghem (CD&V) announced his major tax reform project. In order to widen access to pension savings to all employees and to guarantee the viability of the system, it notably expressed its intention to gradually abolish the preferential treatment of group insurance payments in the form of capital. What to say? As a reminder, group insurance is this extra-legal pension taken out through your employer and which gives you access, at the time of your retirement, to a certain amount of capital. In principle, you can then request the payment of the capital in question in one go or in several installments. In the latter case, we will speak of a periodic annuity. Today, the law imposes no conditions on the payment of group insurance. It is therefore the terms of the contract that determine the different possibilities. The most frequent is the lump sum payment. According to the federation of insurers Assuralia, it is the choice of nine out of ten employees. “If your group insurance provides for the allocation of capital in the form of a periodic annuity, it is this same regulation that determines the periodicity, explains Sammy Bogaert, life insurance advisor at Assuralia. Generally, the annuity will be monthly or quarterly. In principle, you will receive it all your life but in this case, you will not be able to dispose of the capital built up. Conversely, even if your group insurance only provides for a single payment of the capital, you have the legal right to have it converted into a life annuity. But in this case too, you will lose the right to dispose of the capital.” Detail that is important: inflation. When it is high, it gradually eats away at your savings. But also your pension, which cannot be indexed to the general rise in prices. “Life insurance policies can, however, provide for indexation at a fixed percentage, notes Sammy Bogaert. But for the same starting capital, this will result in a lower annuity at the start of the payment compared to the amount you would receive in case of fixed annuity.” In the event of a single payment, an Inami contribution (3.55%) and a solidarity contribution (from 0 to 2%) are deducted from the gross capital constituted (profit participations included). The gross amount obtained (but not the profit share, this time) will then be subject to a final tax. This will depend on various parameters. The part of the capital constituted by the worker’s contributions is subject to a tax of 16.5% for the premiums paid until 1993 and 10% for the payments made from 1993. For the part of the capital constituted by the premiums the employer, the tax depends on your age at the time of the payment and the number of years of career. The rate varies between 10 and 20%. In most cases, it amounts to 10 or 16.5% (plus additional municipal centimes). This tax regime will not be identical with the annuity. “If your life insurance provides for a payment in the form of an annuity, you will pay the same Inami contribution but you will escape the solidarity contribution, specifies Sammy Bogaert. Then, a tax will be deducted from each payment. The annuity will indeed be subject to the progressive rates of personal income tax You will therefore benefit from the tax reductions specific to pensions, but if you have other significant income, you could be taxed at the marginal rate of 50% (plus additional cents If your group insurance provides for the payment of a lump sum and you then decide to convert it into an annuity, you will first be taxed as if the payment were made all at once. distinct from 30% on 3% of the residual capital (plus the additional municipal centimes).” We can therefore conclude from the above that the capital payment is generally the most advantageous formula. And it is precisely this preferential treatment that Minister Van Peteghem wants to abolish. To be continued… Most group insurance provides death cover. If you die before reaching retirement age, a lump sum will be paid to your relatives. The amount and the beneficiaries are listed in the pension regulations. “If you die before you retire, the death capital paid will be subject to a final tax of 16.5% (plus additional municipal centimes) and, in certain cases, to Inami and solidarity contributions, explains Sammy Bogaert In addition, your heirs will have to pay inheritance tax, unless the capital goes to your spouse or children under 21.” If the payment of the group insurance is made in one go, what remains of the retirement capital will be added to your estate, in the absence of contrary testamentary provisions. It is therefore important to inform yourself about this in good time with an expert. If you opt for a payment in the form of a periodic annuity, this is in principle “for life”, that is to say that its payment will stop on your death. “The group insurance regulations may, however, include a possible transfer of the annuity to the benefit of the surviving spouse until the death of the latter, however tempers Sammy Bogaert. For the same starting capital, such a ‘reversible’ annuity will however slightly lower than a non-reversible annuity.If you have requested the conversion of the capital into an annuity instead of having it paid out all at once?In this case, you have in fact waived the capital: in principle, your heirs will not have therefore not entitled to the balance of the capital on your death. Which can be disadvantageous in the event of early death.”