Who can still see the woods for the trees?
As the Belgian Act of 18 December 2015 reduced the net minimum return on pension contributions that an employer must guarantee as the organiser of a supplementary pension plan, a new Royal Decree on Life Insurance of 3 February 2016 also provides for a reduction of the maximum guarantee on life insurances from 3.75% to 2%, with effect from 13 February 2016. This maximum interest rate that insurers may guarantee theoretically still lies higher than the minimum return of 1.75% (2016) that pension organisers must guarantee. However, consistent pressure on financial markets remains so great that insurers still allow their interest rate to fall below this maximum of 2%.
A distinction needs to be made between ‘universal life contracts’ and ‘classic contracts’. In universal life contracts, the interest is guaranteed only on the premiums already paid. No guarantee is given in respect of future premiums. It is only in the case of classic contracts that the interest may also be guaranteed on future payments. Such contracts may therefore have portions of premiums at different past interest rates such as 4.75%, 3.75% or 3.25%.
Few insurers currently guarantee the new maximum of 2% and certainly do not do so any longer for ‘classic contracts’ with guaranteed future premiums.