What is the best investment?

Some networks offer you to transfer the money you have on life insurance to a PER if you meet the conditions to benefit from the tax benefit granted until the end of the year. But decisions made for their sole fiscal interest are not always part of a good wealth strategy!

Read also> Life and property insurance: what is the best investment?

Above all, check that the investments you plan to take out match your goals. For Florence Brau Billod, asset management advisor in Marseille: “PER and life insurance have a different purpose and are complementary. Ideally, everyone should have a PER. But if a 60-year-old client doesn’t have one, but has life insurance, it doesn’t matter, because as long as he has built up an asset that will serve him for his retirement If, at the age when you start building a good savings capacity, you are hesitating between PER and life insurance, you need to consider various factors to decide. If they work in the same way (same support, same dividend), their main difference is in taxation, the availability of capital and their transfer in case of death.

Very different tax systems

If you pay a lot of tax, PER has an advantage that life insurance does not: you can deduct the amounts invested in PER from your income within certain limits. On the other hand, upon exit, the taxation of life insurance is softer:

  • In case of withdrawals on life insurance, for payments made since September 2017, you are only taxed on Flat Tax interest (12.8% tax and 17.2% social security contribution). The raised capital is not taxable. And if your contract is more than 8 years old, you will receive an allowance of €4,600 for a single person and €9,200 for a jointly taxable couple of the share of taxable interest. No compensation is provided in the event of capital outflow from PER upon retirement. The raised capital is taxed according to the progressive scale and the raised interest is taxed from the first euro with the flat tax of 30% (17.2% + 12.8%) or on the progressive scale depending on what is most beneficial to you.

To note: In case of extraordinary withdrawals from PER before retirement to buy your main residence, the capital is subject to income tax and interest to Flat Tax. If you withdraw early due to an accident in your life (death of your spouse, etc.), you are, on the other hand, exempt from tax on the capital share, and social contributions (17.2%) are paid on interest.

  • By annuity, if you have chosen tax benefit on entry, the one you receive under PER is subject to income tax in the pensions and retirement category (therefore entitling you to a 10% reduction ), at your marginal tax rate. While annuities paid under life insurance are taxed according to the tax scale linked to the age from which you take the annuity (eg: taxable fraction of 40% if you start receiving it between 60 and 69).

To understand the difference, Florence Brau Billod explains: “PER works like pensions: in your working life, your social contributions are deducted from your gross salary, but when you retire, your pension is taxed. The big difference is the freedom that PER gives you for the size of your payments, the possibility to suspend them, to increase them, but also to choose between several options at the time of the annuity, such as guaranteed annuities, long-term care, returning to someone who you are not necessarily married to… “

Availability and transfer in case of death: benefit of life insurance

Whereas PER is blocked until retirement ageexcept in special cases (purchase of main residence, disability, death of spouse, expiry of unemployment rights, etc.) money in life insurance is available at any time. Only the taxation changes according to the cancellation date.

Finally, life insurance allows the capital to be transferred on death to the designated beneficiaries outside the estate, taking advantage of low taxation. Nothing like PER was intended to give you an annuity on retirement unless your death occurs before the annuity exit.

Life insurance

Pension savings

Availability of capital

Availability at all times

Blocked except for purchase of main residence or life accidents

Taxation of payments

No deduction

Deduction of payments from income within the limit of ceilings

Taxation of withdrawals

Only interest is taxed with the flat tax* or according to a progressive scale with deductions if the contract is more than 8 years old

After retirement age: pension taxed according to the progressive income tax scale.

In case of withdrawal (conditional before or after retirement) capital subject to income tax scale and interest to Flat Tax or income tax scale.

Exception: withdrawal due to life accident: interest charged only to social security contributions

Transfer of capital on death

Excluding inheritance (tax-free up to €152,500), except premiums paid after age 70, after deduction of €30,500

Reversal exempt from inheritance tax.

In case of death before, same scheme as life insurance.

*for life insurance payouts after September 2017

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