It is not that easy to invest money correctly: The savings investment should generate the highest possible profit and at the same time be protected as much as possible from losses. That sounds like squaring the circle, and there are actually only a few types of investment that meet both criteria. One of them is the so-called premium saving.
- Premium saving is an investment in which both interest and an annual cash bonus are paid.
- How high the premium is depends on the savings rate and the length of the contract.
- A premium savings investment can be terminated at any time subject to the contractually stipulated notice period.
What is premium saving?
Premium saving is a special form of a bank savings plan. In addition to the interest rates gets investors an annual cash bonus paid for the amount of the savings sum shall prevail. In addition, the premium increases during the term of the contract – every year by a defined percentage. The absolute premium amount that the saver ultimately receives depends on the amount invested in the current year and the premium amount in percent.
The amount that the investor pays into the savings plan each month is specified in the contract. As the percentage of the premium is also stipulated in the contract, the investor has a precise overview of the performance of his investment right from the start. If he wants to use the money for a certain purchase, for example, he can calculate the exact total from the start.
Unlike the premium, the interest rate depends on the current market situation and the bank will adjust it accordingly if necessary. In addition, some banks set the premiums higher if the investor pays in higher monthly savings rates.
Premium savings compared to other savings models
Premium savings are more flexible than other savings models, as the investor can terminate the contract at any time with three months’ notice. The savings rate can also be adjusted later. If an investor reduces his deposits, this consequently affects the interest and premiums. Short-term, early access to the money without observing the notice period is also possible – however, banks charge a very high fee for this in the form of so-called advance interest.
Exemplary premium savings plan
In each year of savings, the premium increases by a certain percentage set by the bank. For example, the following graduation is conceivable (deviations possible):
- 1st year of savings: no premium
- 2nd year of savings: no premium
- 3rd year of savings: Premium of 1–3 percent of the savings rate
- 4th year of savings: Premium of 2–4 percent of the savings rate
- 5th year of savings: Premium of 3–6 percent of the savings rate
- 6th year of savings: Premium of 4–8 percent of the savings rate
- 7th year of savings: Premium of 5–10 percent of the savings rate
- 8th year of savings: Premium of 6–15 percent of the savings rate
- 9th year of savings: Premium of 7–20 percent of the savings rate
- 10th year of savings: Premium of 8–25 percent of the savings rate
- 11th year of savings: Premium of 10–30 percent of the savings rate
- 12th year of savings: Premium of 12–35 percent of the savings rate
- 13th year of savings: Premium of 14–40 percent of the savings rate
- 14th year of savings: Premium of 17–45 percent of the savings rate
- 15th year of savings: Premium of 20-50 percent of the savings rate
Around the turn of the millennium, some banks offered premium savings with a very attractive premium tier. Those who took out a savings investment at the time benefit from high premium payments today.
Premium savings: an example calculation
An example calculation illustrates the annual profit from the premium payment: The investor pays in 600 euros annually over a period of 15 years. With a premium tier according to the example table, the investor makes a profit of 588 euros at the end of the term, with a total investment of 9,000 euros – and these are only the premium payments. Then there are the annual interest payments.
- 1st year of savings: no premium
- 2nd year of savings: no premium
- 3rd year of savings: Premium of 2 percent = 12 euros
- 4th year of savings: premium of 4 percent = 24 euros
- 5th year of savings: Premium of 4 percent = 24 euros
- 6th year of savings: Bonus of 6 percent = 36 euros
- 7th year of savings: Bonus of 6 percent = 36 euros
- 8th year of savings: Premium of 8 percent = 48 euros
- 9th year of savings: premium of 8 percent = 48 euros
- 10th year of savings: Premium of 10 percent = 60 euros
- 11th year of savings: Premium of 10 percent = 60 euros
- 12th year of savings: Premium of 10 percent = 60 euros
- 13th year of savings: Premium of 10 percent = 60 euros
- 14th year of savings: Premium of 10 percent = 60 euros
- 15th year of savings: Premium of 10 percent = 60 euros
Early termination and termination of the premium savings account
Premium saving is considered an extremely flexible savings investment. Can or wants to be the investor. If you no longer use your savings account during the term of the contract, you can cancel it at any time subject to the notice period. A termination on the part of the bank is not so easy to implement, but today many banks are starting to terminate their old premium savings contracts for reasons of profitability. Many affected investors doubt that such termination is permissible.
When concluding the contract, the investor agreed a specific contract term with his bank. This is usually 25 years, because the investor can only achieve the highest premium level with a correspondingly long contract period. This is not possible in the event of early termination. If the bank terminates the contract ahead of time, it will not meet its contractual obligations.
In the course of such a termination, banks often offer alternatives to premium savings, but with significantly worse conditions. Investors should never accept termination of the contract by the bank without being contradicted. Anyone affected by early termination is advised to contact a lawyer. The latter can assess whether there is any prospect of success in filing an objection to the termination.
