15:02, 22 October 2022
Is the life insurance vocation the same as PER?
Life insurance can be used to supplement retirement from compulsory schemes, but also for shorter projects, such as financing children’s studies or acquiring real estate, which is not necessarily the main residence. It can also be used to build capital or to strengthen an existing legacy. These different uses reflect how it works, life insurance is taken out for a lifetime and can be redeemed at any time: everyone can cancel their contract in whole or in part when they want according to their needs or goals, or keep it for its transmission . Pension savings respond to a more specific use.
The pension savings [PER] is part of a logic of long-term savings
Apart from a limiting list of cases of termination for certain life accidents according to the law and with the exception of the possibility to terminate the contract in advance for the acquisition of the main residence, the PER aims to build up capital that will provide additional retirement benefits in the form of capital or annuity. PER is part of a logic of long-term savings. It is a form of fixed-term contract, with a start and a term depending on the age you have before you retire, i.e. twenty, thirty or even more.
PER would therefore be suitable for young workers…
As soon as a young employee receives his first paycheck, he begins to fund his pay-as-you-go pension, where his contribution gives rights in mandatory schemes. For funded retirement, the same logic can be followed: it is possible to open a PER with a few tens of euros and then feed it up to a minimum of 25 euros per month through scheduled payments. In advance, it will be necessary to ensure that the chosen contract allows these monthly payments to be increased, stopped or resumed at any time and without penalty. The PER is interesting because it allows you to become familiar with savings practices, even when the saver does not have a specific goal in mind. Another advantage: the earlier the contract is opened, the longer the investment period, the more you can capitalize, since this long horizon allows you to be exposed to risky assets that are more profitable over time.
What to do when a personal project comes up?
In the case of acquiring his main residence, the holder of the contract has the option of releasing his PER in advance, as this is one of the cases of withdrawal provided for by law. If there is another medium or long-term project and when the savings capacity is present, the opening of a life insurance contract is appropriate to take advantage of the liquidity that this framework provides when the time comes. It is an illustration of the complementarity between life insurance and PER.
Read our article – Retirement savings: avoid the pitfalls of capital withdrawal
Does everyone have a fiscal interest in taking out a PER?
Most of the time, PER is offered to taxpayers whose tax bracket is at least 30%, so that they benefit from the right to deduct the payments from the taxable income. But PER responds to all situations, including those for taxpayers taxed in the 11% bracket or non-taxable, as the law allows you to choose non-deduction for payments. At the time of withdrawal of PER in capital, the amounts paid are then exempt from tax, only the gains are taxed.
What happens when you choose deduction for payments?
Finally, the part of the capital that corresponds to the payouts is taxed by income tax at the marginal tax rate. [taux applicable à tout revenu additionnel soumis au barème de l’impôt], while the one corresponding to the income is covered by the individual deduction at 30%. A reflection must therefore absolutely be carried out in order to put in place a suitable exit strategy, support from a professional is therefore preferable. It is better to postpone the withdrawal of PER after the year of settlement of pension rights to avoid a tax surplus, since retirement is often synonymous with the collection of bonuses and allowances at the end of the career. Another option: Choose a split exit for several years in order not to increase the tax burden. The PER can also be liquidated in full before the age of 70 to transfer it to a life insurance contract to take advantage of the latter’s inheritance tax.