Flexible fund-linked policies

How to win over Generation Z

When young people in their early to mid-twenties invest the first money they have earned themselves, many today opt for an ETF savings plan. No wonder: Generation Z has understood that the capital market owns not only the past but also the future. According to a representative forsa survey commissioned by ING Germany and Visa (June 2026), more than half of 18 to 30-year-olds are saving for retirement, and only 49% still expect to receive a state pension in old age. On top of that, ETFs are very easy and cheap to buy today. These exchange-traded funds are flexible products that let investors react to changes quickly and easily.

What many in Generation Z do not know is that, compared with a pure ETF account, fund-linked policies today offer comparable and in some cases even greater freedom. Below, you will find out how to use this to win over younger clients in particular.

1. Contract flexibility

Generation Z prefers products and services that are as dynamic as their own lives, with years abroad, digital connections and a healthy work-life balance. Modern financial and insurance solutions should meet these expectations as far as possible.

ETF account: a savings plan stands out because the term is freely selectable and the instalments can be adjusted at any time. Top-ups are also possible, but they usually come with order fees and possibly further transaction costs. When units are sold, 25% flat-rate withholding tax (Abgeltungsteuer) is automatically deducted from the gains.

Fund-linked policy: most insurers today offer a flexible term. Clients can therefore decide for themselves when they want to retire. Just as with an ETF savings plan, contributions can be lowered, raised and paused for a certain period at any time. Indexation options allow contributions to rise steadily. An important advantage over an ETF account is that top-ups are free of charge. With many products (e.g. Liechtenstein Life Invest), policyholders can choose at the end of the contract whether they prefer a lump-sum payout or a lifelong annuity.

Remember: the contract terms of a (good) fund-linked policy leave more freedom than many people think.

2. Investment flexibility

Studies such as Next Gen Insurance 2025 show that young people increasingly value sustainable investments, while returns remain a central issue. In other words, Generation Z savers keep a close eye on their portfolio and are not afraid to make changes to pursue their investment goals.

ETF account: with most providers, investors can choose from several hundred ETFs, many of which meet environmental, social and governance (ESG) standards. Moving from one fund to another (switch) or restoring the original asset weighting (rebalancing) is possible at any time. However, there are usually fees for this.

Fund-linked policy: an insurer's investment quality is also determined by the size and quality of its fund universe. At Liechtenstein Life, depending on the tariff, clients can choose from over 300 funds and ETFs in various asset classes (e.g. equities, bonds, commodities) to spread their risk. Being based in Liechtenstein also allows diversification by region and currency. The investment range includes ESG funds, which are also a smart choice for performance reasons.

With the fund-linked basic pension (Basisrente) Liechtenstein Life Pension, free maturity management can be agreed: in the last years before the pension starts, the fund balance is moved each month into lower-volatility target funds according to fixed rules. For single contributions and top-ups, there is also start management: the amount is first invested at low risk, typically in a money market fund, and then moved into the target funds in fixed instalments at regular intervals to use the cost-average effect.

Remember: a fund-linked policy allows an optimal balance between financial and ethical investment goals.

3. Tax flexibility

Young savers who are focused on building wealth over the long term also keep an eye on the tax side of their investments. In principle, all capital market gains are taxable. But there are considerable differences between an ETF account and a fund-linked policy.

ETF account: all investment income is subject to the flat-rate withholding tax, which is set at 25%. This applies to interest, dividends and realised price gains. Price gains are taxed not only on withdrawals from the portfolio but also on reallocations within the account.

Fund-linked policy: taxation of the gains is deferred during the accumulation phase. The big benefit is that the compound interest effect has a much stronger impact as a result. There are considerable tax advantages in the payout phase, too: for lump-sum payouts, as a rule only 50% of the gains are taxed (half-income method, Halbeinkünfteverfahren); for an annuity, the taxable portion falls the later the pension starts (Ertragsanteilsverfahren).

For the self-employed, the Basisrente Liechtenstein Life Pension is particularly attractive for tax purposes: it is state-supported and allows contributions to be deducted from tax throughout the accumulation phase.

Remember: fund-linked policies belong to the client, not to the tax office.

4. Flexible insurance cover

As long as a regular income arrives in the account, ETF savings plans are excellent for building wealth. It is a bit like driving by sight. Anyone who realises that they still have a long road ahead of them, however, should also follow a strategic travel plan.

ETF account: a savings plan is an effective investment without insurance cover. Financial protection therefore depends solely on the performance of the portfolio.

Fund-linked policy: the basic principle of pension insurance is retirement provision. Once the payout phase begins, a monthly pension is paid for life. If a minimum term is agreed, the surviving dependants still receive money after the insured person's death. The amount of the pension depends on the contract balance. Various contribution guarantees are also possible if needed.

With (term) life insurance, death cover comes first. If the insured person lives to the end of the contract, the balance can be paid out in one sum or as a lifelong annuity.

Both pension and life insurance can be extended with additional modules (e.g. occupational disability cover), which can be added or removed flexibly.

Remember: flexible insurance cover is in the DNA of the modern fund-linked policy.

5. Flexible wealth planning

Contrary to widespread prejudice, young people today are happy to take on responsibility early. That makes them receptive to the idea of strategic wealth planning that involves the whole family. What matters to them is using every legal option and making their own decisions.

ETF account: legal and tax hurdles have to be considered when transferring wealth. If the account balance exceeds the statutory tax allowances, tax is due both on inheritance and on a gift. On death, heirs first have to apply for a certificate of inheritance (Erbschein), for a fee, to prove their entitlement to the bank that holds the account.

Fund-linked policy: certain tariffs have been developed specifically for wealth planning across generations and flexible estate management. With Liechtenstein Life Wealth, for example, clear roles can be assigned in the contract: policyholder, insured persons and beneficiaries. This simplifies the legal situation early on, and legal tax advantages can be used in a targeted way. Investors thus create the conditions to transfer their wealth (or parts of it) to relatives during their lifetime. The Termfix option, which sets when sums insured are paid out, provides maximum flexibility.

Remember: with a fund-linked policy, clients keep financial control for the rest of their lives, and beyond.

6. Administrative flexibility

Generation Z practically grew up with a smartphone in hand. So when it comes to managing a portfolio, there is no getting around digital management. ETF brokers and direct banks led the way, but innovative insurers have quickly caught up.

ETF account: the focus is usually on the account overview, buying funds and adjusting the savings rate. Many apps, however, are limited when it comes to contract administration.

Fund-linked policy: powerful tools such as the Liechtenstein Life customer app offer a fully digital application process. Once the contract has started, all documents are stored centrally in the app. Personal details can be changed independently (e.g. after family events). Fund switches, top-ups and contribution adjustments are also possible digitally. If clients want personal advice, they can contact their intermediary directly.

Remember: digital solutions make the path to financial independence easier.

Conclusion: flexibility has many facets

Fund-linked policies are complex products, but nowhere near as rigid as their reputation. On the contrary: compared with ETF accounts, which are seen as particularly flexible and non-committal, they even offer more freedom in some respects. Make it clear to younger clients that the many arguments for a fund-linked policy are by no means arguments against an ETF savings plan. In fact, the two products complement each other well when building wealth and form the basis for financial security in retirement.

The value of your investment can fluctuate.

Article published by Prosperity Solutions AG