The Equity Savings Plan (PEA) and life insurance are two long-term investment solutions very popular with the French. They both have a number of advantages that make them attractive alternatives for investing. However, for liberal professions retirement, life insurance remains a more adequate option. We explain why.
Life insurance, a more flexible solution
In terms of form, the PEA and life insurance have several points in common. They are both long-term savings products, with favorable tax conditions. In substance, however, they present relatively important differences.
Indeed, the PEA makes it possible to acquire a portfolio of shares of companies present on the European stock market. Life insurance, for its part, is a contract based on the payment of premiums to an insurance company. In exchange, the subscriber is guaranteed that a capital or an annuity will be paid to the designated beneficiaries.
But that’s not all !
More flexible opening and management conditions with life insurance
The conditions for opening and paying a PEA are very strict. In particular, the law does not authorize a subscriber to hold more than one savings plan. This limit goes to two plans for the same tax household. In addition, payments are limited to 150,000 euros per PEA and to 450,000 euros per couple.
When it comes to life insurance, things are a bit simpler. You are free to hold as many accounts as you want. In addition, there is no limit on the amount of premiums. You can therefore deposit as much money as you want. It all depends on your current income and your desired standard of living when you are no longer in business.
A PEA offers its owner the possibility of acquiring shares only in companies whose head office is located in France or in the European economic area. This considerably limits the field of investment.
For life insurance, on the other hand, no geographic limit is imposed on the companies in which you invest. Ditto for the nature of the securities held. You can invest in all the financial and real estate markets that interest you, whether European or not. In addition, with life insurance you can invest in euro funds and protect your capital against inflation.
With this type of fund, your capital is 100% guaranteed. It is therefore a very interesting option for the retirement of the self-employed. More details here!
Life insurance: savings accessible at any time
In a life insurance contract, the money you save remains available at all times. If you need money to settle an emergency, you can indeed withdraw some of your principal and interest at any time without your account being closed.
In the case of a PEA, any withdrawal of funds before 5 years (apart from the exceptional cases entered in the contract) results in the immediate closure of the savings plan.
Advantageous taxation with a life insurance contract
You are not required to declare your life insurance for taxes. This is because you only have to pay taxes when you make withdrawals. In addition, only interest is subject to the single flat-rate deduction (PFU).
If the withdrawal is made after the 8-year maturation period, the withdrawal is 7.5% for amounts less than 150,000 euros. If it is carried out before the 8-year period, the levy is 12.8%. Thus, the sooner you take out your life insurance contract, the sooner you will be able to benefit from all the related tax advantages.
If you want, you can purchase life insurance with Perlib now without having to travel.
Life insurance : easier succession
A PEA does not offer any advantage in terms of inheritance tax, because the closed amount includes the estate of the deceased and is taxed according to common law. On the other hand, the capital and the interests of a life insurance do not go into the estate of the deceased. They are paid directly to the beneficiary which can be a natural person or an association which defends a cause which is close to your heart.
In addition, if the designated beneficiary is your spouse or your PACS partner, no inheritance tax is deducted. For the other beneficiaries, the tax treatment varies according to the age of the subscriber at the time of the payment of the premiums. Capital paid before age 70 is taxed at 20% after a reduction of € 152,500 (capital and interest included). For those paid after 70 years, a single allowance of € 30,500 is applied.
In summary, life insurance is a more advantageous retirement investment solution than the PEA for the liberal professions. It is at the same time more flexible and more diversified, with the key, interesting tax advantages. No wonder it is also the preferred savings solution for the French.
Read also: Life insurance for liberal professions: the solution for a peaceful retirement