Life insurance and Livret A can be opened from the birth of the child (Photo credit: 123RF)
Christmas is an opportunity to build up savings for your children to use when the time comes to finance their first projects. Life insurance A, life insurance or PER: which type of savings should you choose?
At what age do you have to subscribe?
Life insurance and Livret A can be opened from the birth of the child. Although intended to prepare for retirement, the Individual PER is available to anyone, including minor children, with no age limit. Regarding life insurance, it is wise to open the contract before the child is 10 years old, so that he can dispose of his capital under favorable tax conditions from the age of 18.
Life A is not subject to tax or social contributions, but it is limited to 22,950 euros.
The life insurance is not limited and allows you to save larger amounts, but the taxation at the time of the withdrawal of the amounts is slightly less favorable than for the life right A: if the contract has been open for more than 8 years per at the time of withdrawal, income is taxed at only 17.2% (taxes + social contributions) if it is less than 4,600 euros (for a single person) and 24.7% above.
The payments that the parents make on their child’s PER are deductible from the taxable income of the tax household within the limit of 10% of the taxable income and 32,908 euros. For this, the child must be associated with the tax household. In return, the amounts are blocked until the child’s retirement. However, the law allows for cases of early release: thus, the child will be able to release his savings when he is an adult, for the purchase of his main residence. In summary, PER allows parents to build capital towards the purchase of their child’s main residence while enjoying a tax advantage.
The return on the savings
Since 1 August 2022, annuity A gives 2.00% per year. This yield could be raised on February 1st to 2.50% or even 3.00%.
Life insurance and PER allow you to invest in the fund in euros, support for the guaranteed capital. The latter gave an average of 1.30% in 2021. At the beginning of 2023, the insurance companies will announce the return of their funds in euros for the year 2022. This is expected to be around 1.80% at 2.00% on average (before tax).
Unlike annuity A, life insurance and PER offer a wide range of investment instruments, which in the long term offer more attractive return prospects than for an annuity A or a fund in euros. These supports, called “units of account”, make it possible to invest in the financial markets, real estate, private equity, etc. On the other hand, they do not make it possible to guarantee the capital.