• What is a paper rock?
This term designates an investment allowinginvest in real estate without having to buy a property directly. Thus, an individual who wishes to invest in stone without the worries of rental management can acquire SCPI shares (civil property investment companies), with its bank for example. These companies collect funds in order to invest them in buildings (housing, offices, shops). It can be a direct purchase or through a life insurance policy.
• What return should be expected from an SCPI?
Learn about performance net of management fees of the SCPI. If your banker or your insurer tells you less than 3.5%, it is not interesting, especially since you have to deduct from this rate the costs of managing the life insurance contract itself, which is often rise to 1%. In the end, you have to aim for a net return higher than a fund in euros.
• Are all life insurance contracts open to rock and paper?
It all depends on the insurance companies, but there are many of them. In general, high-end contracts all offer it. The paper stone remains accessible (from €1100 for SCPI shares), it is desirable to be able to keep its shares for at least 7 to 10 years, according to the Financial Markets Authority (AMF). Read also: SCPIs, the best investment for your retirement?
• What are the eligibility criteria?
It is not enough that your life insurance company offers paper stone to be sure of being able to subscribe to it. It regularly happens that insurers invite their clients to invest in SCPI shares, over a limited period or within the limit of an overall envelope. Once this objective has been reached, the subscription is closed. In addition, most insurers do not agree to arbitrate (ie transfer) funds in euros to SCPI shares. They require a new payment. So you have to be able to do it.
• Should a minimum amount be invested?
The answer is no for SCPI shares included in a life insurance contract, you can invest from a few hundred euros. This is an advantage compared to a direct purchase where the entry ticket can be high (around €30,000 for example).
• Is there a maximum?
No, but it is, in general, impossible to invest all the funds of a life insurance on SCPI. Banks or insurance companies most often set a maximum percentage (for example: 30% of the funds invested).
• Is it possible to resell its shares easily?
In a life insurance contract, yes! It would take exceptional circumstances of failing cash in the fund for the saver not to recover his money quickly. However, insurance companies are very vigilant in choosing their SCPIs. Read also: Life and estate insurance, two advantages to remember
• What about taxation?
This is the same as for other funds invested in life insurance. In this context, the income distributed by the SCPI is not, in fact, considered as property income. The rules for partial withdrawals from life insurance apply (part capital not taxed and part interest subject to Flat Tax). This is a significant advantage! Read also: How to dip into your life insurance?
• Are the entry fees important?
They are of two orders. When making a payment for the purchase of SCPI shares, vou must pay the entrance feee provided for by your life insurance contract (for example 3%), and access fees to the SCPI (for example 2%). You can attempt to trade the former, but not the latter. Nevertheless, the insurance company has negotiated them for you, and they have been reduced beforehand.
• Is it a risky investment?
It is certain that the capital invested in SCPIs is not guaranteed. Nevertheless, this support is less volatile than equities. However, you must ask your banker or insurance company to find out the place and type of real estate in which you are proposing to invest. It is better to favor office and commercial SCPIs, as well as European capitals.
• What is the recommended holding period?
At least 5 years, maybe 8 years.
• How are the income distributed by the SCPI reinvested?
This is a question to ask. Do they supplement the funds in euros of the life insurance contract or are they reinvested in SCPI shares? Can you choose one or the other? The more cautious will prefer the first option since, year after year, these sums will be secured in the fund in euros.
• To conclude, who has an interest in putting stone-paper in their life insurance?
All those who want to diversify their funds in euros and who are not attracted by the financial markets whose strong fluctuations they fear. It remains to know what proportion of his savings to devote to it. TIt all depends on the level of diversification of your savings, whether or not you want to take risk for a better return and above all on the possibility of keeping these funds over the long term. You should talk about it with your banker, insurer or wealth management advisor. And take time to reflect.
Thanks to Florence Brau-Billod, wealth manager and president of Patrimoine SA.
Also Read: Life Insurance: Can I Withdraw My Money Without Paying Tax? – Life insurance: how to get the most out of it