Investment life insurance and an individual retirement plan are two financial products that allow save money in a difficult situation, for example, in the event of divorce or property seizure. On pros and cons of insurance and retirement savings - in the text Banki.ru.
Financial zombie apocalypse
The number of Russians recognized as bankrupts is steadily growing. According to the Federal Resource, only last year the courts adopted almost 30 thousand decisions on the recognition of bankrupt citizens and individual entrepreneurs. And only 56 thousand people have already got into this category since the introduction of the procedure for bankruptcy of individuals. The number of bankrupts is growing every year; by the results of 2017 it increased by 30%.
As expected in the legal company "Stopdolg", this year another 43 thousand citizens may go bankrupt. "And this is still a fairly low figure, given the number of debtors to whom the bankruptcy procedure is suitable," says Stopdolg General Director Alexei Demin. According to his estimation, the number of potential bankrupts, also called as "financial zombies", exceeds 1.6 million people. "Gradually, the Russian practice will approach the global, and 3-8% of debtors will also go bankrupt in our country," believes Demin.
For comparison: in the USA there are 250 bankruptcies per 100,000 people, in Canada - 176, in Germany - 132. In Russia, this figure is 19.
According to experts, citizens still do not use this tool because of legal illiteracy and fear of recognizing their financial inconsistency. Meanwhile, the procedure is not so complicated: by the law, anyone can declare himself as a bankrupt, regardless of whether he owes the bank or for utilities. The amount of debt must be more than 500 thousand rubles (excluding fines, penalties), and the debt period must exceed 90 days. One should refer to the court no later than one month after the situation occurrence. The debtor is assigned a bankruptcy manager whose services will have to be paid by the debtor (according to estimates by Stopdolg, this amount usually makes from 50,000 to 150,000 rubles). The bankruptcy manager is to describe and sell the property to pay off the debt. After the completion of all procedures, the bankrupt no longer owes anyone. However, within the next five years, he no longer has the right to resort to bankruptcy again.
The main risk is to lose valuable property, and this is another reason why citizens try to avoid bankruptcy. By law, it is not possible to apply foreclosure only for housing (if it is the only one and is not pledged under a mortgage agreement), personal belongings and basic necessities. Turns out, there is a risk that after bankruptcy you will remain literally in one shirt. Savings for a rainy day, education or a new car can be forgotten about.
Protection from the creditor
Meanwhile, in the financial market, there are tools that quite legally allow protect your money from the greedy paws of lenders, it is investment life insurance (ILI) and an individual retirement plan. The first service is offered by insurance companies. However, it is possible to conclude a contract with the bank, if it acts as an agent. Depending on the purposes and conditions, investment life insurance and universal life insurance (ULI) are distinguished. The main difference is in terms and availability of a guarantee on return of the invested funds.
Endowment insurance is an analogue of pension programs. It is relevant, for example, for those who intend to accumulate capital to pay for their education or for the first installment on mortgage. The contract can be concluded for 15-20 years and during this period contributions can be made. Their size depends on the amount you plan to save. In this case, clients who have concluded an agreement with the ULI are guaranteed a profitability of 2-3%, plus a possible investment income.
The minimum period for agreement is usually 3-5 years, after which the insurance company must return the customer money plus accumulated investment income. If the insured suddenly needs money urgently, he can withdraw it early. But in this case he will have to pay a fine. The company can return only 70-90% of the invested funds to the client.
Although agent banks often advertise ILI as an alternative to a deposit but with a potentially higher return, you can earn as well as lose on ILI. For example, IC AlfaStrahovanie offers the client to risk 20% of the invested amount. Funds in a larger amount are placed in deposits, derivatives and shares of companies in the technology sector. In Sberbank they promise to return 100% of the amount paid. The customer's money is divided into two parts: the first company invests in deposits and bonds, the second - in more risky assets (for example, in shares of consumer companies and IT sector). "Market risk is that the yield of the ILI is not guaranteed, because it depends on the financial market conditions. In case the direction of the value of the underlying asset was chosen incorrectly, the client would receive only the amount paid, "explains Alexander Kozinov, head of the legal department of Sberbank Life Insurance.
Products related to life insurance have another important property: by law, the money contributed is owned by the insurer and is not the property of the client.
One of the main advantages of ILI is the opportunity to get a tax deduction. The maximum amount is 15.6 thousand rubles. If the client makes contributions annually, then he can receive a deduction every year. In terms of profitability, ILII can be more profitable than endowment insurance, which is used in conservative strategies of the companies. In particular, last September, the CEO of IC AlfaStrakhovanie-Life Alexei Slusar said that the profitability of his company ranges from 2% to 30%. Clients of Sberbank Life Insurance earned an average of 6-7% last year, the most lucrative was the investment strategy in IT sector (+ 37.5% per annum), but the customers who had chosen the "Food" strategy lost 4.9 %.
Products related to life insurance have another important property: by law, the money contributed is owned by the insurer and is not the property of the client. "Therefore, in the event of bankruptcy, it cannot be attributed to funds held by third parties," Kozinov explains. So this money cannot be confiscated or seized, it is not a subject to division between spouses in the divorce. Especially, if the debt was formed after the contract with the insurer entered into force. All money is paid only to the client or to those whom he is indicated in the contract. Though, as soon as the contract expires, the company is obliged to pay the client the amount due to him, and formally the money becomes the property of the citizen, which means that the restrictions imposed on other accounts may also apply to it.
There are other subtleties: for example, if the plaintiff can prove in court that the contract with the insurance company was illegally concluded, then money can be exacted. But even here the court can side with the client of the insurance company. "We had a precedent when, during the divorce, the spouse challenged the conclusion of the ILI agreement, since it was formed without her consent. In the process of action, the court could not do anything with this agreement. The client decided to conclude an addendum with the transfer of rights to the spouse. The client independently disposed of his money, "- said Alexander Kozinov.
Pensioners beyond the law
Individual retirement plans (IRPs) refer to voluntary types of pensions, therefore, unlike pension savings, the state does not guarantee their return. In the event of bankruptcy of a Pension Savings Fund, the clients who have concluded IRP agreements can only hope for effectiveness of actions of a bankruptcy supervisor. From this point of view, experts recommend to mind who owns the fund, how transparent its investment policy is, what reputation this fund has on the pension market, how long it is on the market, whether this fund’s branches are in your city and if online services are available.
Besides, it is worth paying careful attention to the terms of IRP itself. For example, does it provide for an early withdraw of pension contributions and earned investment income. In case of early termination of the contract (as a rule, it can be done within 2-3 years), many funds promise to return 100% of paid contributions and part of the investment income. For example, the Sberbank Pension Savings Fund in case of IRP contract termination after two years, the client is paid its contributions plus 50% of the income earned from investment. Five years later, the fund promises to return the contributions and the income received in full.
Investments in IRP do not guarantee that the money will be protected against market risks. In 2016, some PSFs showed a negative return on pension reserves portfolio (they contain funds received under occupational pension schemes). A record loss was shown by the Aviapolis fund, which lost almost a third of customer funds during the year. By the results of 2017, the funds affiliated with Otkrytiye Bank are most likely to be the record-holder in losses: for nine months of 2017, losses from investing reserves of PSF Elektroenergetika amounted to 24%; PSF LUKOIL-Garant lost 10.8%.
The funds that entered the pension fund are hard to recover: they are liabilities of the fund, not the client's funds.
Though on a longer term period, over 7-8 years, the PSFs can compensate for losses. According to the calculations of the General Director of Capital, Vadim Soskov, the accumulated profitability, investments since 2009, for most managers of pension funds are higher than the inflation rate.
The advantages of IRPs are that the client regulates the frequency and amount of contributions based on the current income situation, as well as it is possible to get tax deduction. The terms are the same as for life insurance: 13% of the amount not exceeding 120 thousand rubles. And, as in case with investment lifr insurance, there are no court penalties on the client's accounts in the PSF. "The funds that are included in the pension fund are difficult to collect: they are liabilities of the fund, not the client's funds. It is also difficult to recover an already granted pension", comments the representative of Safmar PSF. In other words, unlike investment life insurance, bailiffs will not be able to seize pension money even after the contract with the PSF expires. Of course, if the fund client has not decided to collect all the accumulated amount and transfer it, for example, to a bank account.
Albert Koshkarov, Banki.ru