Unit-linked policies vs. ETFs: IVFP criticises Stiftung Warentest

• Integrated advisory service:
  Unit-linked policies usually come with comprehensive advice, which is often lacking with ETF savings plans.
• Protection against longevity risk:
  The insurance component covers the risk that the capital saved will not be enough in old age.
• Tax advantages when switching funds:
  During the accumulation phase, no flat-rate withholding tax (Abgeltungssteuer) is due on interest, dividends or capital gains within unit-linked policies.
• Fund switches without extra cost:
  Investors can switch funds within the policy without incurring additional costs.
• Access to institutional share classes:
  Unit-linked policies provide access to lower-cost institutional fund units that are otherwise not available to private investors.
• Death benefit exempt from income tax:
  In the event of death, the benefit from the unit-linked policy is paid to the surviving dependants free of income tax.
• Half-income method for lump-sum payouts:
  With a term of at least 12 years and a saver aged at least 62, only half of the earnings are taxed when the capital is paid out.

Assumptions:

• Investment period:
  30 years
• Monthly contribution:
  5oo EURO
• Total contributions:
  180.000 EURO
• Average annual return before costs:
  7%

ETF savings plan product (private investor):

• Products:
  iShares MSCI World (accumulating), iShares Euro Stoxx 50 (accumulating)
• Ongoing costs (TER):
  0,2% p.a.
• Custody fees:
  0,1% p.a
• Total costs:
  0,3% p.a.
• Capital gains tax (Abgeltungssteuer):
  25% + 5,5% solidarity surcharge = 26,375%
• Tax-free allowance:
  801 € per year

Unit-linked policy – pension insurance:

• Product:
  Pension insurance contract with the funds MSCI World, Akkumula
• Ongoing costs (TER):
  1,0% p.a.
• Capital gains tax (Abgeltungssteuer):
  None during the accumulation phase; half-income method applies to lump-sum payouts