What is a bread fund?
A bread fund is a collective of usually 20 to 50 entrepreneurs. Members agree to support each other financially in case of illness. Everyone puts money aside each month in their own account. This money stays yours. If a member falls ill, that person receives donations from the other members. The benefit runs for a maximum of two years. After that, support from the bread fund stops.
How does it work?
You join an existing group or set up a new group together. You choose in advance what monthly income you want to receive in case of illness. Based on this, you pay a fixed amount into your own bread fund account every month. If you become ill, there is usually a waiting period of one month. After that, you receive monthly donations from the other members. If you recover, the donations stop immediately. If the illness lasts longer than 2 years, the bread fund no longer pays out.
What does a bread fund cost per month?
The monthly costs consist of a fixed deposit and a small contribution for the organisation. The amount of the deposit depends on the amount you want to receive in case of illness. The higher the desired monthly income, the higher your monthly contribution. The organisation fee is usually around €10 to €15 per month. In months when no one is sick, your contributions remain in your own account. You thus build up your own buffer.
Benefits of a bread fund
A bread fund can be attractive for self-employed people looking for a simple and affordable solution. The system is transparent and clear.
- No medical examination upon participation.
- Lower monthly fees than many AOVs.
- Distributions consist of gifts and are often untaxed.
- Unused deposits remain yours as equity.
- You will be part of a network of entrepreneurs.
Disadvantages of a bread fund
A mutual fund also has obvious limitations. It is important to consider these carefully in your consideration.
- The benefit stops after a maximum of 2 years.
- You depend on the group and mutual trust.
- The monthly deposit is not tax deductible.
- There is no professional guidance for long-term illness.
- Not suitable as sole solution for permanent disability.
Brood fund and AOV: differences and overview
A bread fund and a disability insurance differ greatly in design, duration and tax treatment. The table below shows the main differences side by side.
| Brood fund | AOV |
| Mutual agreement between entrepreneurs | Insurance with an insurer |
| Benefit for up to 2 years | Benefit possible until retirement age |
| No medical examination | Frequent medical examination |
| Deposits not tax deductible | Premium tax deductible |
| Lower monthly costs | Higher monthly costs |
| Based on trust within the group | Contractual rights established |
| No cover for permanent disability | However, coverage for long-term or permanent disability |
Many self-employed people opt for a combination. The bread fund catches the initial period of illness. After that, an AOV can provide long-term income security.
SharePeople
SharePeople works on a similar principle, but without fixed groups. You don't save your own pot, but donate directly to sick participants. Everything is done online. There is no medical examination and joining is low-threshold. The support is meant as a temporary income shelter. SharePeople is often seen as a flexible alternative to the traditional bread fund.
Is bread fund tax deductible?
The monthly deposit into a bread fund is not deductible. The money is considered private wealth. If you receive benefits, these are donations from other members. These are usually tax-free as long as the amounts per donor are below the exemption limit. Donations you make to others are also non-deductible. Tax-wise, a bread fund is tax-neutral. The advantage is mainly in the low costs and simplicity, not in tax deductions.
