Many French people choose to save throughout their lives to build up capital which can, for example, increase their income at retirement age. Sometimes better than the payment of capital, life insurance contracts, retirement savings, etc., also give policyholders the choice of receiving, at their end, a life annuity. The latter refers to a sum paid regularly to the insured, until his death. A way to secure your income when you retire.
We speak of a life annuity to designate regular income paid to a beneficiary until his death. This income comes from investments he has made during his life, and more specifically from the savings he has thus built up. A life annuity is therefore a sum of money paid regularly, generally every month or every quarter.
These life annuities are offered in particular in a certain number of insurance contracts such as life insurance contracts, retirement savings plans, or stock savings plans, for example, which make it possible to build up capital in return the regular payment of what are called bonuses.
When signing these types of contracts, the subscriber most often has the choice of receiving, at the end of his contract, his savings thus constituted either all at once in the form of capital, or in the form of a life annuity paid regularly until death.
Many savers choose the solution of life annuities, in particular, at retirement age, to be able to supplement their pension, the amount of which is less than the income they received while working.
The life annuity is calculated when the insured asks to receive it according to the conditions provided for in the initial contract. Its amount depends of course on the amount saved by the insured, but also on the estimated average life expectancy of the insured according to his year of birth. For this, the insurer takes into account data from the National Institute of Statistics and Economic Studies (Insee), which regularly publishes what is called the "mortality table", i.e. the life expectancy of women and men at a given time and according to mortality conditions.
The first advantage of choosing a life annuity when recovering your savings built up over a certain number of years is to be able to benefit from the payment of regular income which in particular can supplement a retirement pension, the amount of which is rarely very high. The life annuity thus makes it possible to secure its level of income, and on a regular basis. An advantage especially if the insured does not die until many years after the start of the payment of his life annuity.
In addition, the life annuity provided at the start of an insurance contract is most often revalued every year, throughout the life of the contract, thus making it possible to protect against the increase in the cost of living. The amount of the life annuity is also known when the insurance contract is signed.
Regarding the yield of the life annuity, insurers generally offer policyholders the option of choosing an annuity at the guaranteed minimum revaluation rate, called the “technical rate”, which gives the possibility of receiving a higher annuity at the start of its payment. However, in this case, the annuity decreases over the years of payments. On the contrary, a so-called "classic" life annuity, that is to say without a technical rate, does not benefit from this form of revaluation but, in the long term, its amount decreases less.
Some insurance or savings contracts do not just pay a life annuity until the death of the insured:they plan to protect loved ones by paying them the life annuity of the deceased afterwards.
If the insured has opted for a "simple" life annuity, i.e. an annuity paid until his death, the rest of the capital he has saved during his insurance contract is lost when 'he dies. On the other hand, if he has chosen a "reversible" life annuity, the remaining capital will also be paid in the form of an annuity to the beneficiaries he has designated in his contract, either in full or for part of this capital, according to the choice of the insured when signing his insurance contract.
You should also know that a life annuity does not benefit from any tax advantage. Those paid for example by a retirement savings product are taxed in the same way as retirement pensions. They are thus subject to income tax after the application of a 10% allowance, as well as to social security contributions of approximately 17%.
On the other hand, life annuities received under a life insurance contract or a retirement savings plan (PER) are taxed only on part of their amount, a fraction defined according to the age of the insured at the time of the first payment of his pension:70% if he is under 50 years old, 50% from 50 to 59 years old, 40% from 60 to 69 years old, and 30% from 70 years old.
Finally, an insured who has chosen in his contract to receive a life annuity at the end of it, and not to receive a capital, cannot reverse his decision if he in fact needs this capital.
