Life annuities have become a star insurance product among those over 65: at the end of December 2017, 17.754 people transformed the money obtained with the sale of some asset (second home, mutual funds, shares, etc.). ) in a guaranteed source of income.
It is a very attractive forecast system that transforms savings into a lifetime income that will never change over time, in addition to offering interesting tax advantages. Also, unlike mutual funds and pension plans, it guarantees greater stability and better complements the retirement pension.
What does an annuity offer me?
The life annuity is a mixed initial single contribution insurance that covers both the owner and their beneficiaries (heirs in case of death).
The insurance includes the following:
– A periodic, guaranteed, constant and life annuity with the desired periodicity (you can choose the periodicity of payment, which may be monthly, quarterly, semi-annual and annual), fixed at the time of hiring
– A capital of death that will depend on the chosen modality
– An insured capital for its beneficiaries, which will depend on the chosen income modality
What advantages do they have?
Income for life. The income you will receive will be for life regardless of the years you live.
Stability. The income will remain stable regardless of the oscillations, both upwards and downwards, of the financial markets.
Capital for the beneficiaries. A capital of death that will depend on the modality chosen
Tax exemption. The income you will receive will have a tax exemption of between 72% and 92% depending on the age at the time of hiring (except for tax residents in Navarra).
In the case of immediate annuities, the result of applying the following percentages to each annuity shall be considered the return of movable capital:
– 40 per 100, when the recipient is less than 40 years old
– 35 per 100, when the recipient is between 40 and 49 years old
– 28 per 100, when the recipient is between 50 and 59 years old
– 24 per 100, when the recipient is between 60 and 65 years old
– 20 per 100, when the recipient is between 66 and 69 years old
– 8 per 100, when the recipient is over 70 years old
These percentages will be those corresponding to the age of the holder at the time of the constitution of the rent and will remain constant throughout the term of the same.
What types of annuities are there?
There are different types of life annuities, depending on two factors:
1. According to the term of the collection, that is to say, the moment in which the holder begins to benefit from the payments:
a) Immediate. The person deposits a capital and begins to receive the corresponding income the month after contracting the policy. The benefits will depend on the age of the contractor, sex, life expectancy and amount of the capital that he allocates. In general, the investment makes sense from 60 years and 40,000 or 50,000 euros. Most people who choose this route use the money obtained from inheritances, property sales or investment funds.
b) Deferred. Those who do not have sufficient liquidity or know that they will not have a way to receive such a high capital, can choose to receive a deferred annuity. They require a previous planning, since during a period of time the person must make periodic income until reaching a certain accumulation of saved capital. When you already have those savings, you have to wait until the time comes to collect the benefits, which will be agreed with the entity.
2. Depending on the destination of the capital invested once the beneficiary has died
a) Pure income. They are the most contracted by companies to supplement the retirement of their employees. The company pays a single premium and the insurer agrees to pay a proportional monthly rent for the rest of the beneficiary's life. The particularity of this model is that the capital invested is not recovered. If the person deposits 50,000 Euros and dies after two years, he will not have taken the best advantage of his investment. But if he has a long life, he will recover it more than once. In this agreement with the insurance entity there is a component of chance and, therefore, of risk. Hence, the monthly benefits are higher than those of other modalities.
b) Income against insurance. It is the star model and the most commercialized among the private clients that have a spouse or offspring. Unlike pure income, when the owner of the insurance dies, his legal heirs recover much of the money invested. As consideration, the monthly rent is smaller: this way the insurer is compensated for the capital that must be reimbursed to the family. The reduction is due to the fact that the owner contracts two simultaneous insurances: survival insurance and death insurance.
Although these four models are the most common packages, there are also mixed systems and specific conditions that can be negotiated with the insurance company. However, the most common is to hire an immediate annuity and against insurance.
Do you want more information about annuity insurance?
In CINC Insurance Agency we offer you the possibility of hiring an annuity insurance according to the modality that better fits your necessities.
Contact with us!
933 030 060 (Barcelona)
972 505 100 (Figueres)
972 940 940 (Girona)