Taking an advance

How to apply your group insurance plan towards purchasing, building or renovating a home

In today’s market, if you’re looking to buy, build or renovate a house or an apartment, you’ll need fairly deep pockets. No wonder so many people turn to their banker in the hopes of qualifying for a mortgage. But did you know that your complementary pension plan can give you a boost in the right direction? If authorised in your pension plan regulations, you can use your group insurance plan to obtain a cash advance.

What is an advance?

This is the amount that can be borrowed against your group insurance reserves for the purchase, construction or renovation of real estate. This allows you to dispose of a portion of your complementary retirement savings now while the same (guaranteed) interest and profit sharing continue to apply.

What are the requirements for taking an advance?

Your first have to see whether your pension plan regulations allow you to take an advance. Your best bet is to check with your employer. If you are entitled to take an advance, keep in mind that it can only be used for the purchase, construction, improvement, restoration or renovation of real estate that generates taxable income. The property (for example, your main home or a second home) must be located in the European Economic Area (the EU member states + Norway, Iceland and Liechtenstein). You can also take the advance and use it towards paying off a mortgage loan.

How much will an advance cost me?

You will be charged interest on the total advance amount. Like a mortgage loan, the interest rate will depend on the option you’ve selected. Planning to pay interest annually, or would you prefer to make one single interest payment when you collect your complementary pension, or pay off the advance? If you opt for annual interest payments, you can choose a fixed or a variable rate.

There are three types of advances¹ to choose from:

cash advance with interest payable annually at a fixed interest rate
cash advance with interest payable annually at a variable interest rate
cash advance with no annual interest payments ("capitalised")

¹only available if this option is expressly stated in the group insurance regulations

	Advance with annual interest payments	Advance without annual interest payments
How?	You withdraw your cash advance and pay annual interest on it in advance. Interest will be charged for the first time when the advance is paid out, and thereafter annually on the first of the month following the month you were born. If you didn't repay your cash advance earlier, the amount taken as an advance will be deducted from your final lump-sum payout when the group insurance benefits are collected.	You withdraw your cash advance, but pay no annual interest on it. The interest due along with the amount taken as an advance will be deducted from the lumpsum payout when the group insurance benefits are collected.
Interest rate	For an interest-paying advance, you have the choice between a variable (not possible for Classical Life plans) or a fixed interest rate.	For an advance with capitalised interest, the guaranteed return and any awarded profit sharing will be taken into account for the calculation of interest.
Tax benefits	Depending on your personal situation, you may be able to deduct the annual interest payments from your taxes.	Depending on your personal situation, you may be able to deduct the interest from your taxes when you pay back the cash advance or collect your group insurance benefits.

Advance with annual interest payments

Advance without annual interest payments

How?

You withdraw your cash advance and pay annual interest on it in advance. Interest will be charged for the first time when the advance is paid out, and thereafter annually on the first of the month following the month you were born.

If you didn't repay your cash advance earlier, the amount taken as an advance will be deducted from your final lump-sum payout when the group insurance benefits are collected.

You withdraw your cash advance, but pay no annual interest on it. The interest due along with the amount taken as an advance will be deducted from the lumpsum payout when the group insurance benefits are collected.

Interest rate

For an interest-paying advance, you have the choice between a variable (not possible for Classical Life plans) or a fixed interest rate.

For an advance with capitalised interest, the guaranteed return and any awarded profit sharing will be taken into account for the calculation of interest.

Tax benefits

Depending on your personal situation, you may be able to deduct the annual interest payments from your taxes.

Depending on your personal situation, you may be able to deduct the interest from your taxes when you pay back the cash advance or collect your group insurance benefits.

Do I have to pay back the advance?

You can pay back the advance at any time, partially or in full. Any outstanding balance will be withheld from your final lump sum retirement payout.

Is there an upper or lower limit to the amount I can take as an advance?

The maximum amount you can take will depend on your contract’s term to maturity and the interest payment option you selected.

Note that the minimum amount you have to take as an advance is EUR 5,000.

Want to find out how much you can take as an advance? Log in to MyAG Employee Benefits to check your personal status.

Interested in applying for an advance? Contact your HR department for more details or fill out our online contact form.

We have summarised all this information for you in a brochure: Take an advance on your group insurance

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