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What is a French Assurance Vie?

Using an Assurance Vie to reach Financial Independence in France

An Assurance Vie is a type of tax efficient investment account available to tax residents in France, including expats.

It’s an empty basket or wrapper that either you or your Assurance Vie provider fills with investments. These investments hopefully go on to make you money over the long term. 

The Assurance Vie isn’t the investment itself, it is the vehicle for the investment. It acts a bit like a UK stocks and shares ISA.

Don’t be fooled by Google Translate

An Assurance Vie has little to do with life insurance. It is a longer term saving plan if you intend to live in France for a long time. 

Many people use it to save for retirement and supplement any state or employer pensions – or indeed use the funds to retire early.

But don’t forget that with all investments, the value of the money you put into an Assurance Vie can go down as well as up – that’s why it’s a long term strategy to even out the ups and downs of the market.

Where do I get an Assurance Vie in France?

Most French high street banks offer an Assurance Vie and your bank will, of course, try to get you to open their version. But you don’t have to stick with your everyday bank – you can shop around. 

Compare other banks and newer online providers. Check their selection of investments and the management fees charged (explained later in this article).

What are the tax benefits of an Assurance Vie?

If you put your money in a normal savings account you would have to pay tax on the interest it made, regardless of whether you withdrew the money or not.

The money you put into investments in an Assurance Vie grows, while left in the account, without having French income tax or capital gains tax deducted. 

So, the moral of the story is to leave the money in there to snowball tax-free for as long as possible.

The golden number to remember is eight years

If you withdraw funds from your Assurance Vie less than eight years after opening it (because life happens and you need the money) you will be liable to pay higher taxes on the growth part of your money.

There is no upper limit to the amount you can put in an Assurance Vie BUT there is more tax to pay if you cross a threshold of money invested of 150,000€ per person (300,000€ per couple) across all your Assurance Vie accounts.

Remember, only the profit or growth part of the money in your Assurance Vie is taxed – but it is a bit of a mystery how the provider works out which bit is your original investment and which is profit. Professional financial advisers can’t seem to agree either.

You do have some income tax allowance on Assurance Vie profit if the account is more than eight years old. It is currently 4,600€ per year for an individual taxpayer and 9,200€ per year for a couple.

The additional tax to pay on withdrawn profit/growth is up to 12.8% if you’ve had the account open for more than eight years AND you exceed the threshold.

Social charges are deducted from profit/growth at 17.2% no matter how long you’ve had your Assurance Vie open. 

The profit is also taxed by the Assurance Vie provider at 12.8% for accounts less than eight years and 7.5% for accounts over eight years.

Looking at all those percentage rates and thresholds – it looks messy BUT Assurance Vies really are one of the best and most tax efficient ways to get your money working for your future.

The table below tries to pull it all together.

Annual income tax allowance on money withdrawn from an Assurance Vie (only growth part is taxed)Tax deducted by Assurance Vie provider when you withdraw (plus social charges deducted at 17.2%)Additional tax payable if threshold exceededAdditional tax payable if threshold NOT exceeded
Assurance Vie account less than 8 years old0€12.8%NoNo
Assurance Vie account more than 8 years old4,600€ individual9,200€ joint7.5%Yes, up to 12.8%No

Beware – if you choose an investment called Fonds en Euro, French social charges are deducted annually. But don’t worry, there are hundreds of investments available that aren’t Fonds en Euro. 

Do you want to manage your own investments held in an Assurance Vie?

Most Assurance Vie providers will push their managed or gestion pilotée products. 

This is when THEY make decisions about where to put your money based on some pre agreed criteria, such as your risk tolerance, when you would want to withdraw money from it, and any ethical boundaries you have like investing in fossil fuels.

A managed investment portfolio held in an Assurance Vie wapper will have higher management fees than one you manage yourself. 

Basically, you keep feeding a managed account with money, keep your hands off and don’t ask any questions until a review meeting with your bank.

We know the FIRE (Financial Independence Retire Early) movement really hates fees. 

So, if you’re serious about making every one of your euros work hard, you’ll be interested in a self-managed or gestion libre Assurance Vie with low, or no management fees.

With a self-managed account, you get to choose which investments you hold in the Assurance Vie and how much money to allocate to each of them on an ongoing basis.

What investments do you want?

When researching who to open an Assurance Vie with, it’s worth checking what investments types or supports they offer.

This is going to sound a bit jargony if you’re a beginner investor, but stick with it.

In your Assurance Vie you can put:

  • ETFs (Exchange Traded Funds) sometimes called trackers in French
  • SCPI (Société civile de placement immobilier) – property investments or REITS in English (Real Estate Investment Trusts)
  • Index funds
  • Bond funds

Have in mind that the FIRE community doesn’t love buying individual company’s stocks but DOES love ETFs and Index Funds because these funds do all the work for you and can offer some of the lowest fees.

The ETF or Index fund keeps track of many different companies. It adds the best companies and boots out the worst. You won’t be worrying when to buy or sell individual company stocks (which is a fool’s game). 

This article doesn’t constitute financial advice in any way. Always do your own research on managing your money and be 100% confident before taking any action.

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