Although it is proposed as a possible exit from financial products such as the equity savings plan (PEA), the retirement savings plan (PER) and life insurance, the life annuity remains little popular. The French prefer the other route, capital outflow, which allows them to recover all or part of the savings invested. However, the annuity scenario, which materializes through lifetime payments, deserves to be studied.
This option is considered and activated at the time of retirement when income falls. Conversion to an annuity allows you to secure regular income (each month, quarter or half-year) paid whatever happens until death. For those who are more cicada than ant, this is a way to ensure that they have money during their lifetime without risking using up their jackpot too quickly, and without worrying about capital management.
“Obviously, the major hazard here is the lifespan”, recalls Frédérique Hazemann, director of key account partnerships for the Inter Invest group. Although it is impossible to know in advance the date of occurrence of this event, some people, having reached a certain age, have an idea of their state of health and have knowledge of the longevity of their ancestors.
“If you make a bet on your longevity, this option is likely to prove a winner, particularly if you live longer than your theoretical life expectancy (determined by insurers’ mortality tables)”underlines Mme Hazemann. On the other hand, in the event of already fragile health or a known medical condition, it is better to move on. Because, in the event of premature death, the “unused” capital remains definitively vested in the insurance company which provides the annuity. Its irreversible nature also makes the transmission of capital to heirs impossible.
Reversion possible
The life annuity nevertheless has some advantages. As life expectancy continues to increase and pension levels are a concern, this is the assurance of securing additional income. “For some, this option frees the mind from financial concerns. Some studies even indicate that the annuity contributes to living longer », Specifies Sophie Nouy, director of the wealth expertise center of the consulting firm Cyrus.
In addition, this formula has variable geometry. It can, for example, be available as a simple annuity (on one life) or a reversion annuity (on two lives).
In the latter case, it is a way for a couple to protect the surviving spouse: if one dies, the other will continue to receive the pension. “The fact remains that life annuity simulations often prove disappointing in relation to the capital saved. For liquidation at age 65 with 100% reversion, the saved capital must be divided by 35 [pour obtenir le montant annuel de la rente]. At age 70, this coefficient increases to 29”explains Gilles Belloir, general manager of Placement-direct.fr.
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