Preparing for retirement: Life insurance and retirement savings plans are two common ways for French people to arrange for their retirement (PER). Focus on how they work and the benefits they provide.
Life insurance: a very free contract
Preparing for retirement: Life insurance operates as a savings vehicle tied to periodic payments known as “premiums” most of the time. You specify contributions for this savings, which may be fixed, free with a minimum amount, or all at once when you take out the contract. You have the option of becoming the beneficiary or designating one.
Despite the fact that life insurance contracts are sometimes bundled together as a single entity, the amount of payment differs depending on your arrangement. Contracts are classified into three types: contracts in euros, contracts in units of account, and contracts with multiple support services. The euro contract has the benefit of having a guaranteed fund. In other words, you can’t lose your money and you’ll get the interest specified in the contract. As the name implies, the funds in the unit-linked contract are not in euros but in units of account that are undertakings for collective investment in transferable securities (UCITS), and what is guaranteed is this unit even if the funds do not. Finally, the multi-media contract is often a combination of investments in euros and units of account. Other, lesser-known types of contracts exist, such as the euro-croissance contract, in which the capital is only guaranteed after an 8-year holding term.
Certain expenses exist in this form of contract that may vary and must be carefully considered, such as administration charges (during the subscription), entry costs that are deducted when the payment and can be either flat rate or proportionate, and management fees. Other expenses, such as arbitration fees, may be charged, particularly if you utilise investment vehicles other than funds denominated in euros. If you want to get the greatest life insurance, there are several comparators available.
If this contract is popular, it is because of its security, but it is also because you may withdraw all or part of your capital before the expiration date since the money is not “blocked” in this form of contract. Then we talk about redemption. The terms of reimbursement are determined by your contract. However, you must be cautious not to have signed a waiver of the right of redemption since you will need the beneficiary’s permission.
The retirement savings plan (PER): a long-term commitment
Preparing for retirement: The PER is considerably newer than life insurance, yet it is also quite successful. Since October 1, 2019, it has replaced the previous forms. It follows the controlled management philosophy. In other words, the later you retire, the more of your funds will be invested in hazardous vehicles, and vice versa.
Individual (which superseded the PERP and the Madelin contract) and corporate PER are the two basic forms of PER, much like life insurance. The collective company PER, which successors the Perco, and the required company PER, which follows the article 83 contract, are typically distinguished.
In general, the PER remains a long-term savings product that is especially popular with individuals who wish to plan for their retirement. You may then determine whether the money collected will be paid in the form of a lump payment or an annuity for a certain length of time, beginning when you retire or ending when you die, as specified in your contract. If the individual PER’s access is open to everybody, some constraints may be imposed inside the corporate structure. Thus, in order to subscribe to the collective one or to belong to a certain category in the obligatory one, it is sometimes necessary to have a seniority of three years inside the scope of the collective one.
Read more: Life insurance Advantages and disadvantages
Preparing for retirement: The payment method is determined on the kind of PER. Individuals are paid on a voluntary basis. The business PER offers greater options since it may be fed by amounts other than traditional payments such as profit-sharing or participation or the time savings account (CET). Other benefits include the employer bearing administration expenses and the corporation making extra payments known as “contributions,” which may be large since they can exceed three times the amount paid and are limited to 6 €582.
The main premise of the PER is straightforward: when you reach retirement age, you may request that your accumulated savings be paid to you in the form of capital, an annuity, or a combination of capital and an annuity. It should be noted that this option is not accessible for a mandatory business savings plan since payments must be paid in the form of a life annuity.
Because the PER is a long-term investment, it is often difficult to get the money. There are several exceptions, such as your potential incapacity or that of a family member, the death of your spouse, or the expiration of your entitlement to unemployment benefits. Its primary advantage is taxation, as contributions to an individual PER, for example, are deductible from taxable income up to a very high overall ceiling: 10% of professional income for the year, net of social contributions and professional expenses, or €4,114, a tax benefit that can be realised when leaving the individual PER. All you have to do is go to many comparators and select the best PER.