A fund savings plan has no sales charge. So there are no closing costs. In addition, there is no annual management fee and therefore more flexibility. The withholding tax essentially influences the decision whether to resort to a fund savings plan or the fund policy in the old-age provision. The so-called final withholding tax applies from the year 2009. Thus, profits on church tax and solidarity surcharge are taxed at 25% per fiscal year.
When does a unit-linked pension plan pay off?On the other hand, unit-linked pension insurance is more favorable if no payment is made before the age of 60 or the term is at least twelve years. With a personal tax rate, only half of the investor's income will be taxed.
Check the policies
Before concluding the contract, investors should scrutinize it because there can be huge differences in ancillary fund policies that, at first sight, are not immediately apparent due to lack of transparency. In the first few years, investors must pay some of the high administration and termination fees that are often included in many insurance policies. Even though they generally offer better after-tax returns, the investor escapes high interest rates in this insurance variant.
If you invest in so-called fund of funds you will often pay three times the fees, especially for fund policies. These include the administration and distribution fees, as well as the management fee of individual target funds.
It should not only be considered in the decision on the pure cost. Also, the selection of offers, on which he can fall back with his insurance, is an important criterion. The more funds available to the interested party, the better he can put together a coordinated portfolio tailored to his personal needs.
Unit-linked insurances are interesting if a longevity risk is to be covered by the saver. With a fund savings plan you can often fall back on a large range of funds, which shines through their variability. As deposits vary from year to year, a fund plan is more appropriate because in the meantime the savings plan can be suspended without incurring drawbacks because the expense ratio for this insurance model rises, while the initial charge on fund savings is only the attributed to each paid installment. The depot thus grows faster at the beginning, because there are no existing closing fees.
If a stock fund pays $ 100 per month for 20 years and thus earns a return of eight percent per year, assets of $ 47,920 will be earned after deducting withholding tax under existing tax law. If the 100 EURO are instead paid into a unit-linked insurance, the saver receives, after deducting taxes, 51,130 Euro in the same investment period and with the same return.
What's the best option?
The decision for or against a product depends on running costs and the calculated return after deduction of the tax. Due to tax treatment, the fund policy is slightly ahead of the pack, while generally higher return opportunities are achieved by a fund savings plan.