How does a certain annuity work?
An annuity certain (also known as a guaranteed or fixed annuity) is an annuity paid for the period of your choice, between a minimum of 5 years and a maximum of 25 years. It is financed by the payment of a single capital of at least 5,000 francs, in exchange you receive a guaranteed pension for the period you have defined and which can then be increased by an excess portion.
The amount of the certain annuity paid in exchange for the capital will depend on several factors:
- The amount of capital paid to the insurance company
- The various options chosen (cash value and distribution of surpluses)
- The conditions applied by the insurance company, there are companies that pay higher annuities than others.
The taxation of a certain annuity
The certain pension offers you very attractive taxation, thanks to it you are exempt from the federal stamp (2.5% deducted from your initial payment) and the guaranteed pension that you receive is not taxed at all on your taxable income.
According to the companies, it is also possible to make the certain annuity non-redeemable, so the residual capital will not be subject to any wealth tax.
The certain pension in the event of death
In the event of death, the persons named in the clause will benefit from inheriting the contract.
Possible options for a certain annuity
You have several options to choose from when setting up a certain pension.
The immediate certain annuity
For a certain immediate annuity, the pension will be paid immediately after the payment of the capital (single bonus).
A certain life annuity is made for you if you already have capital to invest and you want to benefit from the pension payments immediately.
The certain deferred annuity
A certain deferred annuity is an annuity that starts on a future date defined contractually by you.
There are then two scenarios:
You do not yet have the necessary capital, it is then possible to build up capital through various products such as a 3rd pillar, by planning to use the capital for a certain annuity.
If you already have capital, it is already possible to invest it in a certain annuity and to define a future start date (at the age of your retirement for example). The advantage is that the insurance company will pay your capital at an interest rate that is often higher than market averages while waiting for the first pension to be paid.
Redeemable certain annuity:
It is possible to “buy back” the contract, this means that you have the possibility of cancelling the certain pension and recovering the residual capital. On the other hand, each year the insurance company will send you the cash value of your capital (which corresponds to the capital minus the annuities already paid), this value must then be declared as taxable wealth.
Certain non-redeemable annuity:
It is not possible to “buy back” the contract, this means for you that it is impossible to cancel the certain annuity and recover the remaining capital. The big advantage is fiscal: your contract has no cash value and is therefore not subject to wealth tax.
