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No, this is NOT a life insurance!! Assurance vie is a saving account!

Assurance vie saving account has been so successful that today there are over €1.5 trillion invested in Assurance vie policies. Over 22 million individuals have either invested lump sums or save regularly using this instrument.

To understand the success of this product, we need to look no further than the tax advantages that it offers. Avoiding paying tax is a number one hobby in France and the assurance vie allows you to do it legally!! So, unless you want to generously help the French government (in paying back their debt) by paying tax that French people themselves avoid paying, you should look at this properly!

General information: It’s a saving/ investment account. The money you invest is available at any time. You name beneficiaries when you set it up. You are only taxed on interest, not capital. You can set up regular Monthly/ Quarterly or Yearly withdrawal from it. You can invest in it one lump sum (min €5000) or regular Monthly amount (min €100/Month) or both! You can check what it is doing via your online customer account (even make a withdrawal).

Inheritance advantages: Before I talk about the wonderful tax advantages, note that the main benefit of this policy is that it overrides French inheritance law! Basically, when you open an Assurance vie policy you name beneficiary(ies). So when you eventually die, the money left on your policy is given directly to the beneficiary(ies ) without going through the notaire. For your money in the bank, the delay can be up to 6 months (time for the notaire to sort out the inheritance). In the Assurance vie, it is 2-3 weeks after reception of the necessary paperwork (death certificate, passport).

Death duties advantages: I can hear some of you saying “2015 change of law!!” Well think again! As the changes of August 2015 will allow you to be able to chose the inheritance law of your country of birth (instead of French) BUT the tax will always be French tax so if you decide to leave some money to your nephew instead of your rightful children, your nephew would have to pay 55% after an allowance of €8 000!

The assurance vie allows you to leave money to anyone you want and as much as €152 500 per beneficiary! They are then taxed at 20% on what is above the 152 500 euro instead of the % taxed otherwise (55% for nephews and nieces or 60% for others).

This is the perfect solution if you want to leave something to unrelated beneficiaries such as friends or step children, who would otherwise pay tax at 60%.

But this is also a good solution for leaving money to children as they can only receive up to €100 000 each before death duties so with the Assurance vie, they can receive up to €152500 as well as the €100 000.

Do bear in mind that if you are French resident, all movable assets come under French inheritance law so your savings in the UK will be subject to French inheritance tax and law.

Finally, note that it is better that all the money is put in before you are 70 years old as the tax advantage for the money invested after 70 is then €30500 for all beneficiaries combined.

Income tax advantages: Most French people use this product in order to prepare for their pension because once the policy has reached 8 years old, you can withdraw money with an annual tax free allowance of €4 600 if you are single or €9 200 if you are married.

This allowance is for the interest part of the withdrawal so you can take out much more per year and that means you can have regular complementary income tax free (apart from social charges)!

Example: You have opened an Assurance vie with €10 000. After 8 years, you have made €5 000 and you make a withdrawal of €3 000. The taxable amount would be: 3 000-(10 000×3 000/15 000) =€1 000. It is less than €4 600 therefore you have no tax to pay on this withdrawal. If the contract was less than 8 years old, you would have to declare this amount on your French tax return (filled in May the following year). If you don’t pay tax in France, chances are you won’t pay tax on it anyway.

However, the law has changed in September 2017 and now the government takes an automatic flat tax of 30% on the interest on withdrawal for contract below 8 years old(12.8% for income tax and 17.2% for social charges) and 24.7% for contract above 8 years old (7.5% income tax and 17.2% social charges) or 30% for contracts above 150 000€ (only for the interest earned by the part above 150 000€). The year after, if you are below taxable income or if your assurance Vie is more than 8 years old and the interest is below the allowance, the government reimburse you!

Note that the interest is not taxed (income tax) as long as it stays in the policy so if you don’t make any withdrawals, you are not taxed. Social charges at 17.2% is taken automatically each year on the interest part of the assurance vie which is invested totally secured (fond euro). Otherwise taken on risky once you make a withdrawal.

How it is invested and what do you earn: Well, before 2020, with Allianz you could do all secure, but since 2020, Allianz only do a minimum of 30% in funds/shares/bonds and 70% secured. This is because the fond euro which is all on secured earning called is only earning around 1% after social charges and management fees (it is roughly the same in every company). This is because Fond euro is mainly government bonds which are around 0 now!! Because Allianz still have bonds dated back from the 70ies with good rate, we manage to give around 1% but if more people invest in them, the rate is lower. Therefore, no more fully secured investment. But, we have a great tool which automatically transfers the profit from shares to the secured part of your savings when it reaches 5% earnings. This is good because if you never cash in the profits of your shares, you could lose it all if the market crashes!

Note that the CAC40 (French equivalent to the FTSE 100) has made +51.48% in the last 5 years. Some of the Allianz funds (shares) have made +28% in 2019.

The interest on the secured part is given on the 31st of December each year.

What is wrong with it: Well, nothing is perfect in life! So you also need to know the disadvantages of it.

Firstly it can cost money to set it up. There is an entry fee for opening this account and every time you add money to it (normally 4.5% of the amount you invest). But this entry fee is NEGOCIABLE (although most insurance companies and banks won’t tell you that). Yes, of course with me it is negotiable!!For instance, above €100 000, I take 0% entry fee (if at least 30% risky). There is however a €12 administration fee. Even below €100 000 we only take between 0.25% and 2%.

Be very careful with this as some companies do not bother to tell you upfront and you will only realise once the money is invested that there was an entry fee!

There is a management fee (around 0.90%) taken yearly.

Finally, it is more like a long term saving account, as a withdrawal can take up to 2 weeks so this is not to be used as a treasury account.

To conclude, this is a brilliant product but you need to look if it is made for you or not. I always like to look at people’s personal situation (family structure, finance, projects, etc.) to check if it is suitable for them. This appraisal is free so don’t hesitate to contact me for any further information on this subject.

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