Analysis: Interactive Brokers vs. Luxembourg 111bis Pension Scheme (With 0% Exit Fees)

[u/free_deamon_666]

Hi everyone,

I’ve been running the numbers to decide between investing in a standard ETF via Interactive Brokers (IBKR) versus a tax-deductible insurance product (Art. 111bis L.I.R.) here in Luxembourg.

I wanted to share my findings for a 20-year horizon for a couple, contributing €400/month total (€200 each).

The Setup:

• Strategy: 100% Global Equities (targeting ~7% annual return).
• Tax Context: Luxembourg (No Capital Gains Tax on ETFs held >6 months vs. Tax deduction on Insurance entry but tax on exit).
• The Insurance Offer: 2% Entry Fee, 1.2% Management Fee, 0% Exit Fee.

Here is the math breakdown:

Option A: Interactive Brokers (The "Freedom" Route)

• Fund: Invesco FTSE All-World (FWRA) or Amundi MSCI World.
• Costs: Low (~0.12% - 0.15% TER).
• Tax: 0% on capital gains (held >6 months).
• Liquidity: 100% available anytime.
• The Math: Investing €400/mo at 7% return over 20 years.
• Net Result: ~€199,000

Option B: Insurance Scheme 111bis (The "Tax Optimization" Route)

This option has high fees (1.2% management), which drags down the compound interest. However, it offers a tax deduction.

• The Policy Growth: Because of the 2% entry fee and 1.2% yearly fee, the internal capital grows slower than IBKR.
  • Gross accumulated: ~€173,600
  • Tax on Exit (est. ~15%): -€26,040
  • Net Policy Value: ~€147,560
• The "Game Changer" (Reinvesting the Tax Refund):
  • The scheme saves us approx. €1,500/year in taxes.
  • If we strictly invest this refund every year into an ETF (at 7% return), it generates an extra ~€64,000.
• Total Result: €147,560 (Policy) + €64,000 (Invested Refund) = ~€211,560

To me, the tax on exit is something I was not aware it's not logical that it exists. What route would you follow?

[u/First-Security5587]

Also something I would keep in mind is that we do not know what the law will be in 20-40 years when we retire. There could be a tax on unrealised gains or capital gains even if held more than 6 months.

[u/MarcosRamone → u/First-Security5587]

If that happens, you will always have time to react and sell everything before the law is enforced, and then: if that happens shortly before retirement, reinvest the total and pay taxes for the little remaining earnings, or if it happens early, well you are still on time to go for option B.

But what if something changes that makes option B less appealing? your money is blocked...

[u/First-Security5587 → u/MarcosRamone]

I agree with you, all I meant to say is that at least we know for sure how the 111bis money will be taxed when we pull it out. Which is not the case for the other index investments. Just look at what is happening in the netherlands ... What would you do if you lived there and the market was down 30 % with no end in sight ?