Swiss annuities and life insurance are unique. Not only are they a very safe form of investment, they also offer extremely strong asset protection, which is particularly relevant for American investors and also increasingly so for wealthy people elsewhere in the world who wish to protect their assets legally. Depending on the individual situation of the investor, investments in Swiss annuities and life insurance may also offer tax advantages.
All of these advantages are available in an environment of legal and economic stability that Switzerland offers and that is second to none in the world.
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Switzerland |
Why Swiss Annuities? - Read the interview with Marco Gantenbein, director of Swiss Annuity Consulting Group, Zurich, a leading insurance broker specialized in Swiss annuities. |
General considerations – why should you consider purchasing an annuity?
Besides the special features that Swiss annuities offer, annuities in general can serve many useful purposes.
If you are in a saving-money stage of life, a deferred annuity can:
Help you meet your retirement income goals. Employer-sponsored retirement plans (such as a 401(k), 403(b) or Keogh in the USA) are an important part of planning for retirement. However, contributions to these plans and to Individual Retirement Accounts are limited, and they might not add up to enough for the retirement income you need, especially if you started saving for retirement late or had contributions interrupted - perhaps due to job changes and/or family responsibilities. Moreover, your social security and defined-benefit pension (if you have one) may provide less than you need to retire. Remember that the purchasing power of defined-benefit pension income is eroded by inflation.
Help you diversify your investment portfolio. Investment experts routinely advise that, to get the best return for a given level of risk, you should diversify your investments among a number of asset classes. Fixed annuities, in particular, are a unique asset class – an investment that is guaranteed not to decrease and that will actually increase at a specified interest rate (and, often, potentially more). The guarantees are supported by the claims-paying ability of the insurer (or in Switzerland, secured by a mandatory security fund that every insurance company must maintain by law).
Help you manage your investment portfolio. Investment experts routinely advise that, whenever your investments in various asset classes get too far from the percentage allocations you prefer, you “rebalance” to the original formulation, by shifting funds from the classes that have grown faster to the ones that have grown more slowly. If you do this with mutual funds, you pay capital gains taxes; if you do it in a variable annuity, you don’t pay capital gains taxes. When you eventually withdraw money from the annuity (which could be many years after the rebalancing), you pay tax then at the ordinary income rate.
If you are in a need-income stage of life, an immediate annuity can:
Help protect you against outliving your assets. Social security pays retirement income for as long as you live, as do defined-benefit pension plans. But the only other source of income available that continues indefinitely is an immediate annuity.
Help protect your assets from creditors. Generally the most that creditors can access is the payments from an immediate annuity as they’re made, since the money you gave the insurance company now belongs to the company. Some state statutes and court decisions also protect some or all of the payments from those annuities. Here Swiss annuities offer additional, unique asset protection (see below).
Swiss annuities are a very safe form of investment
The Swiss insurance industry is perceived as one of the safest in the world. Since the country’s first insurance company was established in 1857, the industry has grown substantially since then. There are now 178 insurance companies in Switzerland, 24 of them operating in the life insurance sector.
However, the most remarkable fact is that not a single Swiss insurance company has ever been forced to close its doors, failed to meet its obligations or gone bankrupt. This track record is unique in the world. In the United States, for example, several major life insurance companies have failed or gone bankrupt. And in 2000 even Equitable Life, Britain’s – and probably the world’s – oldest life insurer and once one of the proudest names in the industry, had to close its doors to new business (read more about the Equitable Life story in an article published by The Economist). This case actually raised some fundamental questions about the provision and regulation of private pension insurance in the United Kingdom.
In Switzerland, things are quite different. The Swiss Federal Office of Private Insurance regulates all Swiss insurance business by enforcing the strictest regulations known in the industry. All Swiss life insurance companies are required to maintain a security fund which covers all their obligations plus an additional security margin. This fund is segregated from the company’s operating assets. The investment parameters for the security funds are very conservative, the only priority being their safety and liquidity.
The insurance industry is an important part of the Swiss economy and the Swiss themselves are known to be well-insured: Switzerland has the world’s highest per-capita spending on insurance premiums overall, and also the highest per-capita spending on life insurance premiums, as the following table illustrates.
Swiss annuities offer unique asset protection
The extraordinary stability of the insurance industry in Switzerland is one of the most important factors as to why to consider an investment in Swiss insurance products. The special advantages offered by Swiss insurance policies in terms of asset protection represent another one. Accordingly, Swiss annuities are interesting alternatives to more complex, more costly and less secure investments.
Who should consider taking up a Swiss annuity?
Swiss annuities are suitable for anyone who is looking for very safe forms of investments, asset protection, flexibility, foreign currency investments, and many other aspects. The following gives just a brief overview of who typically purchases Swiss annuities:
Anyone interested in one of the safest forms of investments in the world, available in an environment of the unique legal and economic stability of Switzerland.
Investors who wish to diversify internationally into Swiss Francs and wish to do so in one of the most secure ways.
US citizens who wish to diversify their retirement accounts internationally into Swiss Francs and wish to do so in one of the most secure ways. Swiss annuities can be legally purchased by US persons, and they can be placed in US tax-sheltered pension plans such as IRA or corporate plans, or such a plan can be rolled over into a Swiss annuity easily and free of charge.
US citizens, particularly those who are most exposed such as medical doctors, lawyers and other professionals, entrepreneurs, company executives and real estate owners, who wish to legally protect their assets from frivolous lawsuits and unjustified claims.
US investors who are interested in investing in a foreign annuity and who wish to legally avoid paying the 1% excise tax, which is possible based on the provisions contained in the US-Swiss double taxation treaty.
Anyone who wishes to invest in insurance but requires high liquidity. With a Swiss annuity, all capital, plus all accumulated interest and dividends, are freely accessible at any time. Only during an initial period of one year - or even less - there is a minimal penalty in case of withdrawal. Accordingly, with a Swiss annuity, if funds are needed quickly, they are available and not tied down for a fixed period of time. Furthermore, Swiss banks will accept Swiss annuity and life insurance policies as collateral for loans of up to 100% of the surrender value of the policy.
Investors who have substantial assets that they wish to invest in an insurance or via the use of an insurance arrangement, as it is possible that a tailor-made insurance plan (often referred to as portfolio bond or insurance wrapper) is set up which allows the underlying investments to be organized in individual portfolios through the existing investment manager.
US investors with substantial assets to invest, who are interested in tax-deferred investments through tailor-made foreign insurance products.