Retirement: how to increase your income?
Now you’re retired, you want to be able to fully relax, and be sure that you can cover all your costs, especially in these uncertain times. But with much of your previous earnings no longer coming in, how can you ensure that you still have an income?
You have worked hard and made careful choices your whole life, so that you can now take your well-earned pension. COVID-19 crisis or not: future prospects look positive. The average Belgian lives a lot longer and is in better health than in the past. According to the Federaal Planbureau, life expectancy today is 79.6 years for men and 84 years for women. More and more Belgians are also living to 100. In 1992 we could count 527 centenarians in Belgium, whereas according to Statbel they numbered 1,794 in January 2020.
You’d like to be as comfortable as possible in the coming years, and in the best possible health. And because you don't have to think about work anymore, perhaps you have more time for the projects that you’ve been dreaming about for a long time, or taking up fun hobbies, maybe studying again... But being retired costs money, of course. Whichever career you pursued, you will be receiving a monthly statutory pension from the government. However, that pension is likely to be significantly lower than your final salary. One way or another, extra and regular income is desirable.
ING Lifelong Income
Choosing ING Lifelong Income makes it possible. ING Lifelong Income is a lifetime insurance policy subject to Belgian law from NN Insurance Belgium NV. Its return is coupled to an insurance fund (Branch 23), on which NN Insurance Belgium NV guarantees payment of a lifetime guaranteed annuity. This annuity level is determined by your age at the time of subscription. That way, you receive a fixed and predetermined extra income each month, depending on the initial capital you invest. This amount could be, for example, 200, 300 or 400 euros per month. Whether you are aged 75 or 95 does not matter: each month you’ll receive the same minimum amount for the rest of your life, no matter what age you reach (provided you do not take any drawdowns). Consult the legal documents before you register.
This is how it works
This product is an insurance investment product which invests in an investment fund. You are assured of the regular deposit of a guaranteed, predetermined annuity. Each annuity payment reduces the value of the remaining capital.
The amount of the lifetime guaranteed annuity is calculated at the signing of the contract, based on your age at the time and the one-time premium (minimum of 50,000 gross, before deduction of charges and taxes). The annuity amount is then guaranteed for your lifetime by NN Insurance Belgium NV.
Because the annuity for this solution is predetermined, it cannot decrease. However, the annuity may well increase. It depends on the performance of the underlying investment fund.
How does this solution work, in practical terms?
- Subscription is possible between ages 50 to 85 and is only suitable for residents of the Kingdom of Belgium whose tax residence is also in Belgium. You pay a one-time premium of at least 50,000 euros (before deduction of charges and taxes). That capital can, for example, come from savings, following the sale of property, a legacy or from your collective insurance scheme, for example.
- The amount (after deduction of charges and taxes), as well as your age when you sign the contract, determines the annuity you will receive for the rest of your life. The annuity amount is guaranteed for your lifetime by NN Insurance Belgium NV. The older you are at the original joining date, the higher the annuity can be.
- The payments can be made as you prefer: monthly, quarterly, biannually or annually.
- At ING we are aware that you could unexpectedly need money at any time. That is why you can, under certain conditions, draw down your available reserve, either partially or fully. Your annuity will be recalculated based on the remaining reserve.
- In the event of death, your annuity payments will stop. The capital that has not yet been paid goes to your previously named beneficiaries, or to your legal heirs (less any drawdowns taken).
This solution is also attractive in regards to tax, in contrast to other investment products that provide a regular income. You would not have to pay any withholding or other tax on the original annuity. The difference between the increased guaranteed annuity (following a three-year increase) and the guaranteed annuity established at the start of the contract is subject to a tax rate of 30% (plus municipal surcharges).
What is the term of the contract?
The contract term is life long, ending at the time of the insured person’s death, or if the full amount is drawn down. The establishing of the investor profile is required in order to respect your investing horizon. Given that the income is guaranteed for life, it is advisable to keep the contract for the same, life-long term.
How do the costs and taxes work?
The deposited premiums are subject to joining fees of 2% and a tax of 2% on the life insurance premium. The annual management fees for the insurance fund are 0.65% and the maximum costs for the underlying investment fund of the insurance product is 1.10%. The costs for the guarantee of the lifetime annuity that is deducted annually from your reserve is 1.10%.
You will find more detailed information about this further down this page.
The guaranteed annuity is taxed in line with the annuity tax regime. This means that interest on the initial capital amount is tax-exempt. If the annuity income should increase, only the difference between the initial annuity income and the new income is regarded as taxable and will be subject to a 30% tax.
Any inheritance tax must be paid upon death, in accordance with regulations. The beneficiary must also pay tax: in the event of the insured person’s death, the taxable income is equal to the positive difference between the reserve of the contract at the time of death and the one-time premium deposit (following deduction of taxes, but before joining fees), less the non-taxable portion of the guaranteed lifetime annuities already paid by the insurer prior to death. The taxable income is taxed separately at 30% (plus municipal surcharges).
What are the most significant risks?
The largest risks are the market risks, the insolvency risk and the concentration risk. We advise you to be well informed about the risks of this life insurance product before you subscribe. More details about this can be found further down this page.
The capital is invested in the ING Lifelong Income Yellow fund (ISIN code: BE0948481156), which is made up of a 60% investment in share funds and a minimum investment of 40% in bonds.
The fund has the increasing its value as its goal. ING Lifelong Income strives to achieve return by actively managing a portfolio of bonds, shares and money market instruments issued by companies in the European Union and by governments of the European Union. Investments are only made in Member States of the European Union belonging to the Eurozone, in countries that are a part of the European Economic Area, or in shares issued by companies that are listed on stock markets in the Eurozone. Investments in shares and bonds are made mainly in euros. There is a balance between share and bond holdings. In order to attain the above investment goals, the assets of the ING Lifelong Income Yellow fund are invested in the compartments NN Euro Fixed Income VC, NN Euromix Bond VC, NN Euro High Dividend VC, NN (L) Liquid EUR - B Cap EUR, and NN Euro Equity VC by the BEVEK (open-ended investment company) under Luxembourg law NN (L).
This insurance product is coupled to investment funds and is meant for investors with a balanced risk profile, taking account of your knowledge and any experience you may have. Before investing in this product, we advise you to make sure you have a good understanding of the product features, and above all the risks that are associated with it.
The return on a life insurance product with guaranteed annuity depends on two factors:
- The evolution of the invested capital in the underlying investment funds of the contract: ING Lifelong Income Yellow (ISIN code: BE0948481156). The fund offers no capital guarantee and the return is also not guaranteed. The value of the reserve (the invested capital) is therefore directly dependent on the value of the underlying funds. The book value of the fund is available on www.nn.be (by clicking on this link, you will be redirected away from the ING website).
- The regular (monthly, quarterly, biannually or annually) amount of the annuity is guaranteed for life. The amount of this annuity is determined at the start of the contract based on:
- The net amount of the deposit (50,000 euros minimum, before deduction of charges and taxes).
- The applied conversion percentage determined by the age of the insured person when the contract is signed. From 1 May 2018, the conversion percentage for a 50-year old person is 1.25%. This percentage rises by 0.10% for each year over the age of 50 that the insured person is when they subscribe. The maximum percentage applicable is 4.75% for an insured person of 85 years of age. That percentage remains applicable for the entire term of the contract.
The annuity is reviewed every three years, on the date of the start of the contract. At that time, the following applies:
- If the reserve of the contract has increased, the annuity also rises.
- If the reserve of the contract has decreased, the annuity stays the same.
In all cases, the annuity will never decrease - unless you draw money down from the contract yourself. In that case, the annuity will be adjusted to the remaining capital amount.
The annuity is taken from the reserve of your contract by reducing the amount of units in that reserve. Consequently, paying the annuity reduces the value of your contract with each payment. The guarantee charges are also taken from your reserve (1.10% annually).
You can monitor your contract via ING Home Bank, or at a branch office. NN Insurance Belgium NV sends the annual statement to the policyholder each year, on which the value of the contract as of 31 December of the previous year is stated. Additionally, the book value of the fund is available on www.nn.be (by clicking on this link, you will be redirected away from the ING website).
- Joining fees: 2% of each deposited premium.•
- Tax on the life insurance premium(s): 2% of each deposited premium.
- Fund management costs: the management costs amount to 0.65% annually, and this is calculated pro rata temporis monthly, based on the book value of the insurance fund. The insurance fund invests in five other underlying investment funds (managed by NN Investment Partners) and the latter also applies its own management fees. These management fees are included in the net book value of the five underlying funds. These costs for the combined five funds vary and are on average 1.0205% to a maximum of 1.10%, annually. Management fees and the costs for the five underlying investment funds are included in the operational charges. These fees consist of custodial fees, administrative charges, annual statement and publications charges, transaction costs and other charges. The management fee and the above-mentioned costs are included in the net book value of the insurance fund. For more information, see the management regulations. Included in these fees is a charge from ING Belgium NV for its services as intermediary. See also the conflict of interest management policy on the websites of NN Insurance Belgium NV and ING Belgium NV.
- Guarantee charges for the guaranteed lifetime annuity: The charges for the guarantee of the ‘guaranteed lifetime annuity’ are 1.10% annually. These charges are calculated on the basic reserve or on the new basic reserve if the guaranteed annuity has risen, and these fees are also deducted from your reserve (annually).
- Drawdown fee: is applicable to drawdowns from the entire reserve during the first four years of the contract. This charge is degressive: the amount in the first month is 4.80% which is then decreased by 0.10% per month.
- Guaranteed lifetime annuity: The guaranteed lifetime annuity is taxed according to the lifetime annuity tax regime, meaning that only the ‘revenue’ that is included in the lifetime annuity is subject to taxation as movable income. The taxable income is equivalent to the difference between the guaranteed life annuity at the start of the contract, and if applicable, the increased guaranteed lifetime annuity (in the event of a three-year increase). The taxable income is separately taxed at 30% (plus municipal surcharges). NN Insurance Belgium NV reports this income in tax form 281.40. The beneficiary must report that income in their personal income tax return.
- Death of the insured person: In contrast to most life annuity products, the reserve of your ING Lifelong Income contract remains available. This means that in the event of your death the payment of the annuity ceases, and that any capital still available will be paid to the beneficiary or beneficiaries named in the contract. In the event of the insured person’s death, the taxable income is the positive difference between the reserve of the contract at the time of death and the one-time premium deposit (after deduction of taxes, but before entry costs), less the non-taxed portion of the guaranteed lifetime annuities paid out before the death by NN Insurance Belgium NV. The taxable income is separately taxed at 30% (plus municipal surcharges). NN Insurance Belgium NV reports this income in tax form 281.40. In the event of the insured person’s death, the beneficiary must report that income in their personal income tax return. The general rules regarding inheritance tax are applicable.
- Drawdowns: A drawdown is regarded as an early payment of future annuities. In accordance with the tax regime for life annuities, only the ‘revenue’ that is achieved through the drawdown is taxable income from movable property. This also applies during the statutory cooling-off period of 30 days. The taxable income from movable property is equivalent to the difference between the reserve of the contract and the one-time premium deposit (after deduction of taxes, but before the entry costs), less the non-taxed part of the previously paid annuities. Partial drawdowns are applied pro rata, in accordance with the drawn portion of the reserve. The taxable income is separately taxed at 30% (plus municipal surcharges). NN Insurance Belgium NV reports this income in tax form 281.40. The beneficiary must report that income in their personal income tax return.
This tax regime applies to natural persons living in Belgium. The tax treatment depends on the individual situation of every client and may be adapted later.
- Insolvency risk: The life insurance contracts are the object of a special asset which is separately managed within the assets of the insurer. In the event of bankruptcy of the insurer, that asset is first and foremost intended for the fulfilment of obligations to policyholders and/or beneficiaries. In the event of non-payment or the bankruptcy of NN Insurance Belgium NV, payment of the annuity may be stopped and the return of the entire reserve of the contract is uncertain. ING Lifelong Income does not benefit from protection by the Guarantee Fund for Financial Products.
- Market risk: This is a general risk for all kinds of investments. The evolution of the price of movable securities is chiefly determined by the evolution of the financial markets and the economic evolution of the issuers, which are in turn influenced by the general state of the world economy and the economic and political conditions in their country.
- Concentration risk: The concentration risk is greater for investments in one, specific geographical area than it is for investments which are spread over multiple geographic areas.
NN Insurance Belgium (formerly ING Life Belgium) is an insurance company in the NN Group that has a rich history in Belgium. NN Group is a stock-market-listed company for insurance and investment management with a strong base in Europe. The Group operates in more than 18 countries and has over 12,000 employees. It provides more than 15 million clients with pension, insurance and investment services, in addition to banking services (only in the Netherlands).
- Complaints can be directed to ING. You can get in touch with us by telephone on: +32 2 +32 2 464.
- If the dispute is not resolved via this channel, you can contact the Ombudsman for Financial Services Disputes, Belliardstraat 15-17, 1040 Brussels (www.ombudsfin.be), or for insurance contracts, contact the Ombudsman for Insurance, de Meeûssquare 35, 1000 Brussels (www.ombudsman.as).