Flashback. Just three years ago, savers holding, within their life insurance, funds in euros with a yield that had become sluggish (1.3% in 2020 and 2021) were encouraged by a well-established marketing message to get rid of them , in favor of diversified unit-linked supports, more risky, but deemed to perform better over time.
Today, the tone is changing. Revived by the surge in bond rates on which it largely depends, the average profitability of these funds in euros, already up to 1.9% in 2022, took a leap in 2023. Driven by certain offers which yield 3% or more , it should cross the 2.50% mark, returning to its 2014 level.
Certainly, in net inflation terms, this performance remains negative. But the risk-return ratio of this investment is undoubtedly regaining its luster. “Euro funds are once again establishing themselves as a most attractive investment choice”, estimates Antoine Delon, president of the online broker Linxea.
Insurers have every interest in exploiting this upward trend to counter competition from term accounts and Livret A accounts (28.7 billion euros in net inflows in 2023, compared to – 27.6 billion euros for funds in euros life insurance, due to large withdrawals). The opportunity for them to draw new money into their networks in order to revitalize the bond assets on which their euro funds are based.
What about savers? Trying to answer this question requires firstly arbitrating the match between funds in euros and Livret A. The latter yields 3% (rate blocked until the end of January 2025), net of income tax and social security contributions ( 17.2%), subject to a payment ceiling set at 22,950 euros, which can be relaxed by playing the family card (each spouse and each child can in fact have their Livret A).
Yield increasing
On the other hand, the euro fund looks a little pale: it is loaded with fees – on the amounts paid and for annual management -, its performance is subject each year to social security contributions, and, in the event of withdrawal (they are possible at any time), its income is taxed on the basis of a variable flat-rate tax (15%, 12.8% or 7.5%), depending on the exit date, seniority and amount of the contract. After eight years, however, this income benefits from a significant reduction of 4,600 euros, or 9,200 euros for a couple.
Housed in the envelope of life insurance, which benefits from an unparalleled inheritance regime (the contract does not enter into the assets of the deceased and can be transmitted to the beneficiary of their choice duty-free until 152,500 euros), the fund in euros is therefore especially valuable in a medium-term or long-term heritage vision. It actually constitutes a secure base that can be funded without limit of amount and whose capital is permanently guaranteed by the insurer.
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