Retirement is a top priority for 15 million life insurance policyholders. This is good because this investment has all the assets to fulfill this objective. Explanations.
A life insurance contract is rightly considered the Swiss army knife of heritage. It helps boost the profitability of an investment, gradually build up capital, pass it on to loved ones and of course supplement retirement income.
Payments: accessible to all and free of any commitment
It is often thought that life insurance can only be dreaded for large amounts. However, the placement being very flexible, it is possible to adjust the payments as you wish and to start from a few tens of euros per month.
Setting up scheduled payments, ideally monthly, is a good way to build up capital smoothly in order to prepare for retirement.
To do this, choose a life contract that is flexible, low in costs, with a rich financial offer adapted to your situation.
Two families of life insurance contracts coexist. The historical single-carrier contracts which offer to invest in the single fund in euros and the multi-carrier contracts which, in addition, offer the subscription of various financial supports.
However, nothing prevents you from investing 100% of your savings in the euro fund of a multi-support contract.
Performance: a mix between funds in euros and units of account
The central element in the composition of a life contract is its fund in euros. Most often corresponding to the general assets of the insurance company (it is sometimes a ring-fenced fund), it alone accounts for 80% of the 1.650 billion euros outstanding investment.
The reason for such success is simple: for several years it has offered the best net tax return with a capital guarantee.
The regular decrease in his remuneration, 2.3% in 2015, 1.8% in 2016 (much more for the Trophées d'Or du Revenu contracts), before the application of social security contributions (15.5% currently and 17, 2% from 2018) limits its appeal, but does not diminish its interest because it remains very significantly higher than the level of inflation (1% in September over one year).
Another major advantage: the support in euros is liquid and allows you to take advantage of a ratchet effect that annually secures the interest accrued on the contract. As the financial offer has improved significantly, it is nevertheless tempting to boost the financial allocation of your contract while respecting your risk profile.
If your wealth objective is to set up a supplementary pension, it is likely that your investment horizon will be relatively long, allowing your contract to be diversified with more dynamic assets.
To achieve this, preferably opt for a contract that gives access, with multiple managers, to various media: diversified funds, equity funds, trackers to reproduce the performance of a stock market index at low cost, live securities, etc. .
Scheduled payments are also perfectly suited to a retirement goal since they allow investment in the financial markets by multiplying the entry points while avoiding buying high.
Taxation: unbeatable to build additional income
To build up additional income when you retire, you will need to make withdrawals, which insurers call “buybacks”.
This operation can be carried out episodically through partial redemptions, or on a regular basis through scheduled partial redemptions.
If you opt for the second solution, the redemption amount is then paid into your bank account at the desired frequency: monthly or quarterly, for example.
During a redemption, the tax base is reduced since only the part of the interest included in the transaction is taxed. This fraction of the interest on your withdrawal is exactly the interest part of your contract.
Example of the use of life insurance in retirement
A withdrawal of 1,000 euros from a contract of more than eight years worth 100,000 euros which is made up of 20% interest will carry 200 euros of interest (20% × 1,000 euros).
By default, this gain includes your taxable income and therefore follows the progressive tax schedule. Depending on your marginal tax bracket, you may have an interest in opting for the flat-rate withholding tax (35% between the date of opening of the contract and four years, 15% between four and eight years and 7.5% beyond) .
Above all, contracts of more than eight years allow you to benefit from an annual deduction on earnings (all contracts combined) of 4,600 euros for a single person (9,200 euros for a couple).
Using our previous example, you can withdraw 23,000 euros (46,000 euros for a couple) each year tax free. Here is a real bargain.
To find this figure, divide the allowance from which you are a beneficiary by the capital gain portion of the contract. Note that during this operation, social security contributions that have not been paid as and when will be retained. These are unit-linked gains and gains made before 2011 by the euro support of multi-support contracts.