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My annuity insurance is about to pay out: now what?

Aug 08, 2023
3 min reading time

Have you taken out annuity insurance in the past and are now approaching retirement age? If so, chances are that your annuity insurance policy will soon be paid out. You used to be limited in your choice to purchase an annuity with the accumulated capital, but today there are several attractive alternatives available.

The time of payment of your annuity insurance policy arrives when the policy's maturity date is reached. Typically, the accumulated amount is paid out in installments. However, this periodic payment can also be deferred. Here you have the choice between a temporary or lifetime annuity payment. With a temporary payment, you will receive monthly payments for ten or fifteen years, for example. The amount of these payments depends on the current interest rate, whereby a lower interest rate leads to a lower payment.


Deferral of benefit or adjustment of form

It is possible to defer the payout of your annuity insurance policy, which actually amounts to extending the term of the policy. You also have the option of transferring your annuity to another insurer. If you want more drastic changes, you can even choose a different form of savings to supplement your retirement. This allows you to better tailor your retirement provision to your current situation.


Bank savings as an alternative to annuity insurance

A frequently made switch is from annuity insurance to bank savings. This concept differs somewhat from a traditional annuity insurance. With bank savings, you receive benefits for a maximum of 20 years from your state pension age. In the event of death, the benefit stops, and the remaining balance passes to your dependents.

As a rule, bank savings typically provide higher returns than conventional annuity insurance. In addition, the costs are usually lower, resulting in a higher payout.


Special regulations and tax issues

Different rules apply to annuity policies taken out before 1992 and premium-paying annuity policies started before Oct. 16, 1990. In some cases, you then do not have to purchase an annuity, and under certain conditions you can even donate the accrued amount to someone else.

With an annuity payment, you face income tax. Although it is fiscally advantageous to deduct premiums during the accumulation phase, you will have to pay income tax when you reach the end date of your insurance. After reaching the state pension age, a lower tax rate may apply.


Is your annuity insurance payout coming up? Want more insight into annuity insurance, bank savings, or other methods to supplement your retirement? Don't hesitate to get in touch. Our advisors will be happy to help you!

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