The fund’s average return in euros in 2022 will inevitably be much lower than the price increase. However, there are solutions to optimize the potential return of your life insurance, with a unique tax framework. Three guest life insurance specialists explore the investment choices to consider during our next program “En Plateau Avec”. An appointment to follow live on Wednesday 16 November.
You don’t need to be a psychic or fortune teller to predict the average performance of the fund in euros in 2022! It will inevitably be lower than the inflation rate. In fact, last September INSEE noted an increase in consumer prices of 5.6% compared to the level of September 2021. On the other hand, the average return paid by funds in euros in 2022 should be at or close to the 2021 level (i.e. 1, 3 %).
Investors’ hope for the year that is coming to an end is therefore to find alternatives. Has the time come to cash in your life insurance contracts to transfer your savings to a regulated book while you wait for better days (and inflation control)? Will Livret A, like other regulated savings products, be more profitable in 2023? Actually since 1eh August and until 1eh in February next year, the state has increased the remuneration from 0.5% to 2% per year. This decision can be renewed from March 2023.
Some savers have already chosen regulated savings accounts. In France, France Assureurs recorded a net outflow of life insurance in August 2022 of -700 million. EUR*. The Eurofund is mainly affected by this outflow. At the same time, Caisse des Dépôts recorded a record net inflow of Livret A and Livret de Développement Durable et Solidaire (LDDS) of 5.28 billion euros. Should we follow this movement? The long-term investor will think twice before giving up the advantageous and unique tax framework of life insurance.
Taxation, even in times of crisis, remains a major asset for life insurance
Life insurance remains the French’s preferred investment. It concentrates the majority of their savings with 1826 billion euros in assets in August 2022 against 497 billion euros for Livret A and LLDS1). This investment has two unique advantages. The first is the full tax exemption for capital gains from 8 years of ownership of the contract (4600 euros per year and per person or 9200 euros per year for a couple). The second is the favorable tax framework offered for the transfer of your assets.
Life insurance also allows you to help a member of your family or a relative who is not an heir**, by transferring a total tax-free capital of up to 152,000 euros upon your death. To do this, you must have made your payments before you turn 70. A different tax scheme applies to your subsequent payments, but it also contains a specific allowance.
Opportunities to optimize the performance of your life insurance
Without renouncing the unique benefits of life insurance, it is possible to optimize the search for returns on your multi-support contract. A first avenue to study is the growth fund. It makes it possible to combine the guarantee of the capital (at the end of the contract) and the prospect of a potential return that is higher than that of the fund in euros. The second solution to boost your life insurance is linked to diversification of responsible accounting units (UC). Your insurance company offers you at least one of three different families:
- An entity labeled “SRI” (Socially Responsible Investment) to finance a sustainable transformation of companies,
- A device labeled “Greenfin” to direct your savings towards activities in favor of the environment and the climate, and
- A “Finansol” unit to participate in the financing of solidarity programs (access to housing, employment, etc.).
By diversifying the savings in your life insurance contract, you combine your search for returns with your convictions. In addition, in times of financial uncertainty, you can optimize the management of your life insurance by investing in the support of a professional. There are several formulas for all investment goals and all budgets.
To help you optimize the potential returns of your life insurance contract in relation to your personal situation and your projects, Sidonie Watrigant welcomes three specialist guests. They explore and decipher investment opportunities in times of inflation during our next event “En Plateau Avec”.
*Sources: France Insurers, Caisse des dépôts (August 2022).
**You must designate the beneficiary(ies) of the saved capital in the beneficiary clause of your life insurance contract. A notary can advise you on this point and tell you if your choice respects the reserved part legally due to your heirs.