Your savings
V.For the capital you have put into safe savings products, the impact of the corona crisis will be relatively limited. In contrast to investment products, safe savings products require capital to be retained. So with a savings account, a term account and a savings insurance (branch 21) you can be sure that you will see your capital again. Since the credit crisis, banks and insurers have also been obliged to build up solid capital buffers, so that in the event of a sharp correction of the financial markets they are sufficiently hedged to always be able to repay the savings. And although we are not experiencing a financial crisis, there is also a deposit guarantee of 100,000 euros per bank and per person for savings on top of those buffers. In other words, should your bank go bankrupt, the government will guarantee you this amount.
Under the Supplementary Pensions Act, the employer must guarantee at least 1.75 percent interest per year over the term of the contract.
Note, capital preservation does not equate to preservation of purchasing power. With an interest payment that is close to zero – for savings accounts 0.11 percent, an inflation of 2 percent means an (annual) loss of purchasing power of your savings that is just as high. In other words, the longer you leave money on such a low-interest savings product, the less you can buy with it in the future. The corona crisis may have extended that period of loss of purchasing power. According to Peter Vanden Houte, chief economist at ING Belgium, savers risk losing purchasing power for at least another 10 years.
Your investments
Since the beginning of this year, the European stock index Euro Stoxx 50 has lost more than 30 percent. Depending on the type of product you are investing in, the loss will be smaller or perhaps even greater. No one can say whether the bottom has been reached. As during other stock market crises, corona also makes clear what the benefits of a diversified portfolio can be. The more diversified the portfolio, the smaller the loss.
For example, for an internationally diversified equity portfolio, the loss is ‘limited’ to 24 percent. For a mixed portfolio, which includes both stocks and bonds, losses can fall to less than 10 percent.
For those who invest via a savings plan, the stock market losses do not have to be that great. Anyone who systematically puts a (limited) amount into a fund savings plan every month will effectively have invested a part at the peak in February, but will just as well invest a part on the floor in the coming months. By investing in spread you reduce the average purchase price. Persistence is certainly the message in these times.
Your pension savings product
Those who participate in individual pension savings can choose between a fund and an insurance policy. For pension savers who save via insurance, the corona crisis has hardly any impact on their pension savings bank. Those savers enjoy a guaranteed interest, so that there is always capital preservation. However, the profit share, which comes on top of the guaranteed interest, could be much lower due to the sharp correction in the financial markets.
Those who are shaved stay in place better.
Those who invest in a dynamic pension savings fund saw their accrued capital drop by up to 20 percent since the beginning of this year. “The only thing we can do is to have patience,” say the administrators. After all, you cannot withdraw your money before your 60th birthday, unless against a severe tax penalty. However, no end date has been set on which the capital must be called up. Those who are 65 years old can therefore decide to leave the money in the fund for a while in anticipation of better exit times.
A much-used strategy of pension savers is to completely transfer their accumulated capital in a dynamic fund to a defensive fund at the age of 55. In this way, capital has been exposed to less risk in recent years.
Your supplementary pension
In principle, the impact of the corona crisis on your supplementary pension is limited. The Supplementary Pensions Act (WAP) obliges your employer to guarantee an average return of 1.75 percent per year on all deposits you make, regardless of market conditions. The guarantee must be fulfilled over the entire term of the contract, and therefore not necessarily every year. So if you have group insurance with your employer or if you are affiliated with a pension fund, you can assume that your contributions will remain intact at retirement age and have enjoyed a minimum return.