What is EIP?
The individual pension commitment (EIP) is a life insurance policy that allows companies to set up a supplementary pension plan for individuals (company executives). This solution is particularly well suited to self-employed workers, who can use it to periodically contribute an amount to their pension from their company, which is paid and deducted by their company!
EIP in Branch 21: what about returns?
Ten years ago, Branch 21 was systematically recommended in supplementary pension contracts because it offered an acceptable return at the time. Unfortunately, this is no longer the case today...
The bond yields of sovereign states that form the basis of Branch 21 will probably never again offer acceptable returns. As proof, the German 10-year bond yield, often used as a benchmark, is currently zero.
In Belgium, inflation reached a staggering 5.71% in December 2021. In January, just one month later, this rate rose to 7.59%. Inflation has never risen so sharply in just one month since the early 1950s and has not reached such a high rate in nearly 40 years.
At this rate, even if inflation stabilizes at around 3-4%, capital loses half its value over a period of 8 to 10 years. Branch 21 is therefore no longer the ideal solution.
EIP in Branch 23: a profitable alternative?
Branch 23, meanwhile, offers the advantage of combining the stock and bond markets through funds that must be diversified but also match the investor's profile. Each portfolio is constructed according to its owner's risk aversion, making it defensive, neutral, or dynamic.
These funds, managed by professional management companies over the medium to long term, should in all cases generate returns higher than those offered by Branch 21.
Through Branch 23, it is also possible to invest indirectly in real estate, without the constraints of a tenant, through diversified real estate funds.
Depending on the investor's preferences, it is also possible to invest in SRI (Socially Responsible Investment) funds through companies and public entities that contribute to sustainable development. This makes it possible to reconcile economic performance with social and environmental impact.
Under an EIP contract, given that periodic payments help to smooth out the risks associated with market fluctuations, Branch 23 undoubtedly offers the potential for higher returns than Branch 21 bond market investments.
Insurance companies are gradually shifting toward Branch 23, which is clearly the right strategy for the years ahead.
How is your EIP coming along? EIP simulation with the RGF Group
Inflation means that it is now urgent to review your EIP contract in order to adapt it to market realities. RGF advisors are available to help you build a portfolio that suits you and combat the lack of returns. Try an online EIP simulation on the RGF Group website to obtain a tailor-made plan that meets your specific expectations.
