A PEL Home Savings Plan or life insurance: which should you choose?

Why choose life insurance?

Life insurance is a 'Swiss Army knife' of savings, providing financial protection for yourself or your loved ones. Here are two examples of the many possibilities offered by this savings product.

Annabelle is Belgian. She lives in Luxembourg and works in a consultancy firm. When her daughter was born, she and her partner wanted to set up a savings solution that would provide a capital sum for their daughter when she came of age - to help her continue her studies or set up home for the first time - but also to protect her in the event of a bump in the road.

"My first instinct was to open a traditional savings account, but the returns weren't very attractive. You get back the money invested, but nothing more. So I turned to my insurer. He advised us to take out life insurance. By saving €120 a month, my daughter will have a guaranteed sum of money when she turns 18, or even earlier if something were to happen to me.”

Thomas is French. When he moved to Luxembourg a few years ago, he took the opportunity to build up a savings portfolio based on various life insurance products.

"I had a small financial reserve in a dormant account when I arrived. I quickly heard about the advantages of life insurance products in Luxembourg and thought it might be a good idea for me and my partner. I opened several to meet different objectives: to take advantage of a better return, to protect my loved ones in the event of my death, and to build up additional income for my retirement.?>??

What are the advantages of life insurance?

• Higher returns than savings accounts (depending on the risk profile chosen)
• Profit sharing (depending on the product)
• The option of choosing a capital guarantee
• Contributions are tax-deductible
• The capital paid in is known from the start of the policy.

What are the limits of life insurance?

With life insurance, you are obliged to honour the payments defined in advance. Of course, you can always adapt the policy to suspend payments, but this means recalculating the capital that will be paid out at term.

What are the maximum tax-deductible amounts for life insurance?

Each taxpayer can deduct €672 a year from their tax base. A married couple with 2 children can deduct up to €2,688 a year. See details on Guichet.lu

Why opt for a home savings plan?

The purpose of the home savings plan is to buy or build your main home, convert or renovate it, or repay your mortgage.

Lucile had a home savings plan, and she and her partner decided to buy their home before the end of the minimum 10-year term. "We didn't use our PEL to buy because we didn't want to lose out on the tax benefits of past deductions. That way, we'll soon be able to do some work on the bathroom".

Annabelle has also taken out a home savings plan in Luxembourg. "I didn't have a home savings plan before I bought my house in Luxembourg because I was living in Belgium. But when our bank presented us with this product, we decided to take it out, thinking that it would be great for paying off our mortgage early in a few years' time or for carrying out renovation work??.

What are the advantages of a PEL?

• It's a safe and secure way to save
• Amounts paid are deductible from taxable income
• Interest is tax-free
• The credit is insured at the end of the defined period, at a rate known in advance
• Payments can vary and be adjusted according to means

What are the limits of the PEL?

• The conditions governing the use of savings are very strict and only apply to housing
• The money must be used for your principal residence
• The real estate projects financed concern properties located in Luxembourg only
• A PEL must be held for at least 10 years. Contributions are free, but the money is frozen.

What are the maximum tax-deductible amounts for a home savings plan?

The home savings plan is also eligible for tax relief. And if you're under 40, these amounts are doubled, so make the most of it!