Well-designed life insurance policies focus on low costs

20. October 2022

Vienna-Life Lebensversicherung AG combines low fees with a highly flexible, individual and profitable investment strategy in its life insurance solutions. Life insurance and annuity policies can be used for asset protection and retirement financing.


As of January 1, 2022, the guaranteed interest rate for life insurance policies was reduced from 0.9 percent to 0.25 percent for new policies. And according to a media report, insurance customers can expect the lower guaranteed interest rate for classic life insurance policies to be maintained in 2023. The German Actuarial Association (DAV), as the highest authority of German actuaries, had already issued a recommendation to this effect. The development is ominous: at the beginning of the millennium, the guaranteed interest rate for life insurance policies was still four percent.


“This means that the guaranteed interest rate is even lower than the yield on absolutely safe ten-year German government bonds, to which some high costs must then be added. In relation to rapidly rising inflation and the other fiscal risk factors, this need not end in a good deal for savers,” says Hannes Fahrnberger, CEO of the Insurance company Vienna-Life Lebensversicherung AG in Liechtensteinwhich belongs to the international holding company Vienna Insurance Group in Vienna. He refers to a report that made the rounds in mid-March. The German Federal Financial Supervisory Authority (BaFin) had investigated the costs of life insurance policies and criticized what it saw as excessive deductions at the expense of customers. In some cases, effective costs of four percent had to be paid. The study also confirms that kickbacks on unit-linked life insurance policies are common in the industry. And in the case of some contracts, BaFin even had doubts as to whether the products should have been released at all, according to a media report.


However, Hannes Fahrnberger knows from practical experience that life insurance and annuities do not have to be bad per se. Vienna-Life is one of the recognized and established specialist providers of flexible unit-linked and unit-linked life insurance and annuity solutions issued in accordance with Liechtenstein insurance law. Vienna-Life’s solutions focus on preserving assets over the long term, especially in very dynamic and disruptive times, and on passing them on to the next generation in a structured and fiscally and strategically optimized manner. For many years, the focus has been on the “Wealth Creation Policy” and the “Private Wealth Policy”: Both products are protected by the Liechtenstein Insurance Supervision Act and, by intelligently structuring assets, aim to achieve sustainable success in personal wealth management, capital protection and retirement planning.


For Hannes Fahrnberger, this means the concept of the future in life and pension insurance. “We combine low fees with a highly flexible, individual and profitable investment strategy. Because we believe that well-made life and pension insurance policies can definitely serve asset protection and retirement financing.” The “wealth accumulation policy” is a flexible unit-linked private pension insurance against a single premium or regular premium, which provides a lifelong pension or a one-time capital payment. The assets are saved over a period of years and thus provide an additional pension or a one-time lump-sum payment. In addition to investing in asset-based investments or precious metal funds, investments in multiple mutual funds, ETFs and money market funds are also available. Via the “Private Wealth Policy”, in turn, asset management can be organized in a very broadly diversified manner by compiling an individually suitable one from several thousand funds, ETFs and certificates or individual asset management strategies.


In terms of cost reduction, Hannes Fahrnberger particularly emphasizes the possibility of designing pension and life insurance policies under Liechtenstein law as ETF policies. ETFs are passive, listed index funds that track the performance of an index and are extremely cost-effective and flexible to use. Partial withdrawals and additional payments are also possible at any time. In addition, ETF policies offer considerable tax advantages. Taxation takes place when the policy is paid out or when the insured event occurs. In addition, if the policy is structured as a lump-sum policy, there is no up-front lump-sum tax. Speaking of which, withdrawals or payouts from the policy after the age of 62 are only taxed at half the personal tax rate. This also applies in the case of annuitization. If the assets from the ETF policy are paid out to the beneficiaries due to the death of the insured person, neither income nor final withholding tax is due.

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