What Are Tax-Deferred Investments?

Tax-deferred endowment insurance means that the insured can enjoy pre-tax premiums when applying for insurance and pay taxes when receiving insurance premiums. If the personal tax-deferred pension insurance is implemented, the delayed tax payment will obtain the time value of money and can participate in the investment to obtain income. However, this is the first time that China has tried to implement a preferential tax policy for personal contributions to endowment insurance. Because it involves multiple departments such as the China Insurance Regulatory Commission, the State Administration of Taxation, the Ministry of Finance, and the People's Insurance Department, and requires the relevant departments to make concessions, coordination and work are difficult, so progress is slow .

Tax-deferred pension

The so-called tax-deferred endowment insurance means that the insured can enjoy the pre-tax premiums when applying for insurance, and pay the tax when receiving the insurance money. Once this system is introduced, it will greatly promote our personal pension planning and financial planning, and further make the insurance industry develop healthier and faster. However, this is the first domestic attempt to implement tax incentives for personal contributions to pension insurance, as it involves

First of all, the social endowment insurance system we enjoy is still incomplete. The social insurance replacement rate (ratio of post-retirement income to pre-retirement income) of enterprise employees is only about 45%, and the replacement rate of employees in public institutions is only slightly more than 60%. If we don't want the living standard to drop sharply after retirement, the replacement rate should be no less than 70%, which requires us to establish our own retirement plan as soon as possible. Financial management should consider safety, profitability, liquidity and other aspects to diversify the risks that may be faced, but insurance still has an irreplaceable role due to its security and the specificity of special funds. It should be everyone must make arrangements when making financial planning. One of the items. Secondly, in personal financial planning, tax-deferred deferred pension plans can also help us to avoid taxes reasonably. In this plan, the insured pays premiums before taxes. This will reduce the taxable income in our income and reduce the corresponding tax base and tax rate. The current system of personal income tax in China is the excessive progressive tax rate system. The tax base and tax rate are different for different incomes. The basic principle is that the higher the income, the higher the tax rate. When the future premium payment is subject to tax, because the recipient is already at During retirement, income usually decreases and the corresponding tax rate decreases. Therefore, the essence of tax-deferred endowment insurance is that the government helps us to establish our own endowment insurance by sacrificing taxes, and jointly improves the social endowment system through the government, enterprises, and individuals.

The so-called tax-deferred endowment insurance means that the premiums paid by individuals can be deducted from the pre-tax wages within a certain amount, and then paid when receiving insurance benefits after retirement in the future. The difference.

The most famous tax-deferred pension plan abroad is the US 401K annuity plan. According to the plan, companies set up a special 401K account for employees, and employees take a certain percentage of their monthly salary into their pension accounts, and companies generally also pay a certain percentage of fees for employees (not exceeding the employee's payment). Employees choose securities portfolios for investment, and the income is credited to personal accounts. When employees receive pensions from this account after retirement, they only need to pay general income tax (investment income such as interest during the investment period also enjoys tax deferred benefits). The program's many years of practical experience show that its deferred tax feature is popular with businesses and employees.

The Shanghai personal tax deferred endowment insurance products mentioned in related reports are positioned as contractual endowment insurance; the product forms are divided into universal and dividend types; the tax deferred model adopts the "tax base deferred" type, that is, at the stage of payment and income Tax exemption, and then pay tax according to the current tax rate table; the limit of payment is 1,000 yuan per month, of which 700 yuan is used for personal pension insurance tax exemption and 300 yuan is used for corporate annuity tax exemption. However, it is not clear whether the two accounts will be piloted at the same time or whether the commercial insurance annuity will be followed up later. According to estimates, the "tax-based deferred" model is adopted. Under the same income, the sooner you purchase tax-deferred endowment insurance products, the higher the tax savings will be in the future. When you start to buy products at the same time, the higher the income, the more The provincial tax is also higher. In terms of coverage, both enterprises and institutions and government agencies can participate. In the product operation mode, the company withholds and pays taxes when paying the fees, and the insurance company withholds and pays taxes when receiving them; when employees leave, they can transfer between different insurance companies and different enterprises. ^[2]