Are you already getting the most out of your individual pension agreement?
As a self-employed person with a company, you can build up a supplementary pension through an individual pension agreement (IPA), but the historically low rates affect the return. Let us explain how you can benefit from a better return for your IPA.
Due to the low interest rates, the returns for pension plans with guaranteed rates (branch 21) have decreased in recent years. It is therefore not a bad idea to consider branch 23 (partially) for your IPA. You will not benefit from a guaranteed return, as the return depends on one or more underlying investment funds, which means that you can take advantage of a positive climate on the markets and therefore benefit from a potentially higher return than with a branch 21 policy.
Depending on your profile as an investor, you can choose the investment funds for your IPA, with each fund rated from 1 to 7 according to risk. A low risk rating means that the fund is more defensive or cautious. Your broker will help you to determine your profile as an investor and will propose a tailor-made branch 23 solution. In the end, as a policyholder, you will choose what you would like to invest in and decide on the risk which you are willing to take.
In any case, it is in your best interest to space out and diversify your investment, which may be done in different ways:
different ways:
- By making regular payments (e.g. every month) of small premiums rather than one big premium per year.
- By investing in several funds with different risk ratings.
- By keeping part of your IPA in a branch 21 policy and investing the rest in a branch 23 policy.
To know more about NN’s Individual Pension Agreement (IPT).
