Busting Myths About the French Assurance Vie



Busting Myths About the French Assurance Vie

If you’re searching for a tax-efficient investment option in France, you’ve probably heard of the Assurance Vie. You’ve probably also heard a number of myths and misconceptions about French Assurance Vie products, and it can be hard to separate the good advice from the bad. Here’s what you really need to know.

Each month I try to think about the questions I’ve been asked about the most recently or the phrase I say the most. At the moment, this seems to be: “There are a lot of misconceptions about Assurance Vie…”, so let’s start there! A prospective client said it perfectly to me last week: “I have heard bits from friends and people I know in the village, and read bits on the internet – everyone thinks they are an expert, but I’m still not sure – that’s why I contacted you!”

What do you REALLY need to know about the Assurance Vie in France?

When it comes to Assurance Vie, the principles are straightforward, and it is very tax-efficient in many ways, as I have discussed in previous articles (such as this one) and re-capped below. What alters with the Assurance Vie is not the product itself but the individual rules that are applied by the provider/company of the Assurance Vie (I often liken it to a UK Stocks and Shares ISA, in the sense that what the Assurance Vie does is wrap up your investment in a tax-efficient manner).

For example, you can obtain an Assurance Vie from your bank or local insurance company – your bank may put restrictions on withdrawals in the first two years, while the Insurance company might allow you complete access. There are actually no restrictions on withdrawals within the first eight years under the principles of the Assurance Vie, unless the individual company you hold your Assurance Vie with apply those restrictions.

Generally, you should look at an Assurance Vie as a medium to longer-term investment as investments can go down, as well as up, and some providers have a minimum investment period, or you may be subject to a penalty for early encashment. It is essential that you take proper advice to find the solution that suits your individual needs – what is right for your neighbours and friends may not be the right solution for you.

As an added bonus, an International Assurance Vie taken out via Blacktower can be held in GBP, Euros or USD and is portable, so should you move from France in the future your investment doesn’t necessarily have to be cashed in but can potentially be taken with you.

What are the principles of an Assurance Vie, and how can it help you with your tax planning?

Here are some of the most important principles to understand regarding the Assurance Vie:

  • Your investment is allowed to grow tax-free.
  • Should you wish to withdraw funds, only the part of the withdrawal that is subject to a ‘gain’ will be subject to tax and social charges, as the majority of your withdrawal is classed as return of capital.
  • For higher rate taxpayers, you can choose to be taxed at the lower rates attributed through the Assurance Vie regime (12.8% in years 1 – 8, plus 17.2% social charges. After year 8, if your net premiums are below €150,000, then you can benefit from a reduced rate of tax at 7.5%) or your nominal rate, so if you are a nil-rate taxpayer, then you will have no tax to pay.
  • After your 8th year, there is a tax-free withdrawal allowance of €4,600 per annum (€9,200 for a joint policy), after which additional withdrawals are taxed as above.
  • You can nominate anyone to be a beneficiary of your Assurance Vie, and unlike other aspects of inheritance, the recipient is entitled to receive the equivalent of €152,500 tax-free, with anything over this taxed at a rate of 20%. This means that anyone who is not a blood relative or spouse (step-children, non-married partners or friends) will not be subject to the usual 60% Inheritance tax. (Different amounts apply if the initial investment is made when you are over the age of 70.)
  • Savings can be kept in sterling or be made in Euros or US dollars and can currently be ported back to the UK should you return in the future.
  • You can have a choice of investment options to suit your specific requirements and level of risk, which can be altered as your needs change.
  • Assurance Vie policies are exempt from Wealth Tax.

If you have any concerns about your current investments and pensions and would like us to review, contact us today by email [email protected] or call me on 06 38 86 99 70. Website: www. blacktowerfm.com

This communication is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity.

Blacktower Insurance Agents & Advisors Ltd is regulated in Cyprus by the Insurance Companies Control Service and registered with ORIAS in France. Blacktower Financial Management (Cyprus) Ltd is regulated in Cyprus by the Cyprus Securities & Exchange Commission and is registered with the AMF in France.

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