Building up capital

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.

Extra income?

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?

  1. 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.
  2. 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.
  3. The payments can be made as you prefer: monthly, quarterly, biannually or annually.
  4. 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.
  5. 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.

Want to learn more about this solution (Branch 23 investment insurance)?