Life insurance: what performance for your savings?
French savers have a relatively high risk aversion. Even today, most of the assets invested in life insurance by savers are invested in euro funds. The success of euro funds can be explained in particular by the guarantee on invested capital. Assets invested in euro funds amount to nearly 1,300 billion euros. By way of comparison, the amount of assets placed on the livret A and the LDDS is slightly less than 500 billion euros.
In recent years, the performance of euro funds has been in constant decline, a fall in yields which affects all risk-free investments. The recent rise in the rate of the 10-year OAT (treasury bonds issued by France), however, gives hope for a stabilization of the performance of euro funds.
Most euro funds deliver performance of between 0.80 and 1.60%. Few funds exceed this rate.
But savers have the choice of investing outside the euro fund. Because in life insurance, you can also invest in units of account (investment funds). In the inflationary context we are going through, savers have every interest in turning to dynamic unit-linked vehicles. Life insurance allows you to diversify your savings on equity funds and real estate supports.
Consequently, the performance of life insurance will depend on the policyholder’s choice of allocation, ie the distribution chosen between euro funds and unit-linked funds. The performance of equity funds varies enormously from one year to the next. As for real estate supports, SCPIs (real estate investment companies) are currently very popular with savers, they show average annual performance of around 4.5%, excluding revaluation of shares.
How to identify the best life insurance?
The best life insurance policies stand out on 3 points: fees, quality of support, and management options. This information can be found in particular in this online life insurance comparison.
On the cost side, the best life insurance policies have no payout fees and no arbitration fees. While savers who don’t pay attention can pay up to 5% fees on each payment and 1% fees on each switch! And annual management fees on unit-linked products do not exceed 0.60% per year for the best contracts.
As far as supports are concerned, the best life insurance policies operate in an open architecture, ie they give access to funds managed by different distributors, which makes it possible to enrich the choice of accessible funds. The best contracts reference hundreds of investment vehicles. Real estate supports are very popular with savers, but not all contracts offer them, this is a point to watch out for if you plan to diversify your real estate contract.
The last point to look at concerns the mode of management. Investors generally have the choice between free management and controlled management of their contract. With managed management, the saver delegates the allocation and management of his contract. If this is the mode of management envisaged, do not hesitate to compare the performance histories of the managed management of different contracts, taking care to compare performance at an equivalent level of risk. Life insurance generally offers 3 to 10 allocation profiles.
Online life insurance often displays the most advantageous characteristics, it is not surprising to find them at the top of the comparative rankings of life insurance.
Life insurance: a tax-efficient savings scheme
The success of life insurance can be explained for several reasons. In tax terms, policyholders benefit from an advantageous framework in several respects.
Life insurance is, like the retirement savings plan or the equity savings plan, a so-called capitalizing envelope. The saver can grow his savings within this envelope by benefiting from a privileged tax regime.
Indeed, the gains made in the envelope are not taxed as long as the capital is reinvested in the contract. In detail, only the gains made on the euro fund support taxation over time, because social security contributions (17.2%) are collected annually.
The taxation of the bulk of the gains only occurs when the life insurance policy is withdrawn, and here again, the insured enjoys a favorable regime. The share of gains on withdrawals made on life insurance for more than 8 years benefits from an allowance of 4,600 euros per year. This abatement is increased to 9600 euros for a married or PACS couple.
Take the case of a couple with life insurance with a total outstanding amount of 200,000 euros, half of which would come from payments and the other half from investment gains (ie 50% capital gain). This couple can make a partial withdrawal of 19,200 euros without paying income tax. Indeed, the share of capital gains, 50% of 19,200 euros, or 9,600 euros corresponds to the amount of the allowance from which the couple benefits. In this case, only social security contributions (17.2%) will be collected on the part of the gains materialized on the occasion of this withdrawal, i.e. a tax of only 1651.20 euros.
Life insurance is also an essential tool for passing on your heritage. Because the designated beneficiaries of a contract can inherit the capital invested without paying inheritance tax up to 152,500 euros. We often hear that a succession must be prepared well in advance, life insurance is a good illustration of this recommendation since the tax advantage on successions mentioned above only applies to payments made on the contract before the 70 years of the insured. For payments made after this age, the inheritance benefits are considerably reduced.
This device can be combined with other existing devices, in particular the allowance for direct line transmissions, donations in dismemberment, etc.