Much has been said in recent days of the 26 billion euros placed by the French on their A booklet. But we have talked much less about the underperformance of life insurance.
Life insurance more profitable than Livret A
For once, among the 38 million French people who have a contract, some have had to dig into it to face the crisis. In the end, over the past year, the balance between the sums deposited and the sums withdrawn is negative by more than 7 billion euros. Does this mean that life insurance is a worse investment than livret A? Far from there.
On average, the amounts paid on life insurance contracts will have generated 1.7% interest last year. Opposite, the booklet A gives only 0.5%.
What about the taxation of life insurance?
You will tell me, one is tax exempt, and not the other, but it’s wrong: as long as the money remains on the life insurance policy, it does not pay tax. It is only in the event of partial redemption that there are taxes to be paid, and even then they only relate to the interest part of the redemption. It’s a bit complicated, but to keep it simple, remember that taxation is not a subject. So why is booklet A so popular? Quite simply because it is very easy to deposit money there, but also to withdraw it, which is not the case with life insurance.
You often have to pay an entry fee of 1% or less by negotiating and the redemption can take days or even weeks. However, with 1.7% interest on average in 2020, and with negative inflation of 0.3%, 1,000 euros placed on a life insurance contract generated around 20 euros in interest, against just over 5 euros, with a livret A.