Pewne Jutro Fund – the first Polish reverse mortgage insurance

The first Polish insurance company launches a reverse annuity mortgage insurance. Towarzystwo Ubezpieczeń na Życie Europa SA has offered to its customers the Pewne Jutro Fund which provides an additional source of income for old-age pensioners. The solution supports persons over 65, who have no savings but own a real property. Taking account of increasingly lower old-age pensions, this is a realistic method of improving living standards for many elderly people.

Taking a retirement is today linked to a significant decrease of income. As the data of the Polish Insurance Association for the last year show, in Poland the replacement rate, or the ratio of the first pension to the last salary, amounts to about 30 per cent. In case of people with the lowest earnings, it may amount to even 50 per cent. According to demographic estimates, in a few dozen years old-age pensioners and pensioners may constitute as much as 30 per cent of the population. The Central Statistical Office states that in 2010, a Polish man lived in average 72.1 years, while a Polish woman lived 80.6 years. The forecasts of the Central Statistical Office show that in 2035 as much as every fifth Pole will be over 65. The life expectancy of men will increase to 77.6 years, and of women - to 83.3 years. Due to demographic changes, in particular a gradual aging of the population accompanied by an increase of the life expectancy, the value of the old-age pension will continue to decrease. In such situation, it is a great challenge to ensure a decent standard of life.

- By analyzing the Polish economic situation and changes in financing of social security systems in other countries caused by an aging population, we created an innovative product, the idea of which is similar to a reverse mortgage - said Krzysztof Mędrala, Vice President of TUnŻ Europa SA. The Pewne Jutro Fund is a life insurance in form of life annuity, which allows to pay the premium by transferring the property right to a flat or a house on the insurance company. The uniqueness of our solution on the Polish market consists in the ability of appointing beneficiaries entitled to receive benefits after the death of the insured person.

The Pewne Jutro Fund is dedicated to persons who are over 65 and have a title to a house or a flat. They do not have to be old-age pensioners. Personal servitude, entered into the land and mortgage register, gives them right to use the real property for life. The insurance company pays the rent, and the customer only has to regularly pay the utility bills. The amount of monthly annuity is calculated based on: amount of premium (determined based on the value of the real property, valued by a certified property valuer, less the value of the personal servitude of the real property), age of the insured person, length of the selected guaranteed benefit payment period (time in which the annuity is paid to beneficiaries in case of death of the customer) and amount of rent. The annuity is indexed every 2 years. An additional profit for the customer is that there is no need to pay tax on the annuity, as it is an insurance benefit.

Sample annuity simulation

An old-age pensioner aged 75, who paid the premium in form of transfer of ownership to a flat located in Warsaw, of an area of 50 sq.m., valued at PLN 400,000 and with rent of PLN 200 per month, may receive a monthly life annuity of PLN 770. Additionally, Towarzystwo Ubezpieczeń na Życie Europa SA will pay each month the rent amounting to PLN 200. (Simulation assuming the customer chose a 36-month guaranteed annuity payment period for the beneficiary.)

Towarzystwo Ubezpieczeń na Życie Europa SA is the second Polish company among life insurance companies with respect of gross written premium (according to Consolidated Half Year Report, as of end of 2011), which provides an insurance cover to nearly 1 million persons. This year, it celebrates its 10th anniversary. It is a part of Europa Insurance Group, which includes TU Europa SA listed on the Warsaw Stock Exchange and, since recently, Open Life, in which the insurance company holds a majority stake. The Europa Group is a leader of insurance products dedicated to the Polish financial sector (bancassurance). Its specialized portfolio is focused on insurance products: financial, non-life, personal, travel, life, for SMEs as well as guarantees.
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