Focus on assurance vie

Assurance vie: France's favourite investment

Assurance vie has come a long way over the last few decades. From simple single-fund, euro-denominated policies, assurance vie now has a multi-fund approach and also offers many different financial management options.

Assurance vie adapts to suit you, whether you want to build up or increase capital, protect it or pass on an inheritance, reduce your tax bill, or even earn extra income. The various features of assurance vie allow for added flexibility whilst reliably meeting your objectives for your finances, family, tax and wealth in general.

Our policies, which are now more sophisticated and tailored to the market than ever, can offer you a choice between discretionary management and autonomous management, and allow you to benefit from the financial markets' performance over the long term, whilst minimising risk.

Find out more:
• Assurance vie summary
• Assurance vie details
• Favourite tax conditions
• A solution to meet all your goals

The advice offered on these pages is not exhaustive. We encourage you to contact your HSBC advisor who will give you personalised guidance, suited to your goals and objectives. Information relating to assurance vie policies is valid within the limits of the provisions set out in the Terms and Conditions/the policy information leaflet.

Assurance vie policies benefit from a favourable legal and tax status. This means you can increase your capital thanks to a wide range of financial products and plan for your estate under advantageous conditions.

A simple principle

With assurance vie, the date on which you take out your policy is essential, as this is when your personal “tax meter” starts. Even if you are only able to save a small amount, it is important to start saving as early as possible by taking out a policy with the minimum required sum (which varies according to policy). You can then pay in money as you wish, through:

• Lump sum payments according to what you can afford
• Regular payments, which you can modify or stop at any time

And if you need money during the life of your policy, you can access the sums invested provided that you leave the minimum amount specified in the policy: you can partially redeem your policy to meet one-off needs or set up scheduled partial redemptions for on-going needs⁽¹⁾.

A wide selection of investment funds

All our assurance vie policies offer a wide selection of investment funds:

• A permanent financial offering
ranging from the most traditional euro-denominated funds with a capital maintenance guarantee and a performance ratchet effect, to a wide range of mutual funds including pure mutual funds (money market, bonds, equities) and protected, allocated, diversified or target mutual funds
• Exceptional financial offers giving you access to guarantee funds for a defined period

Our wide range of investment options allows you to build up a personalised capital reserve, according to your investor profile and risk aversion. It also permits you to combine security with performance over the long term.

If you make regular payments into your assurance vie policy, mutual funds are the best investment choice. To help secure long-term performance, you can level out market fluctuations by buying mutual fund units at a different price each time you make a payment.

Different management styles

To help you with the financial management of your assurance vie policy, some of our insurance products offer different management styles, allowing you to delegate management to financial experts.

You can also opt to manage your policy yourself:

• By switching between funds⁽²⁾ to build up your policy in line with market opportunities
• By selecting our financial management options to reduce risk, for example the automatic reinvestment of capital gains, the limitation of capital losses or gradual investment (available depending on the policy)

Fund switching

You can change your initial choice of investment by switching between funds. As assurance vie policies operate differently from asset portfolios, all insurers impose a limit on the number of trades ⁽²⁾ per year.

Policy beneficiaries

In the event of your death, your wealth will be transferred under favourable tax conditions to your freely designated beneficiary or beneficiaries. This may be:

• your spouse or PACS partner,(French civil union), in which case, the inheritance you leave through payments made into your policy is exempt from death duties ⁽³⁾.
• any other person, be it an individual (a relation, a close friend) or a legal entity (a charitable organisation, a research institute)

In most cases, our assurance vie policies offer a standard beneficiary clause. Its broad wording and the designation of beneficiaries by default (spouse, offspring and heirs), means it can be adapted to suit most circumstances.

However, you can also define the terms of any other clause of your choice and specifically designate one or more beneficiaries. Should you wish to draw up a tailored clause, contact your HSBC advisor or your notary. This will ensure an accurate reflection of your wishes, reducing the risk of interpretation difficulties when your assets come to be distributed.

You can alter your beneficiary clause at any time ⁽⁴⁾. Regularly update the wording of the clause to ensure that it remains appropriate to your personal situation and that it reflects your wishes.

Find out more:
• Assurance vie summary
• Assurance vie details
• Favourable tax conditions
• A solution to meet all your goals

(1) According to prevailing tax legislation.
(2) According to the terms and conditions set out in the policy.
(3) TEPA law No. 2007-1223 of August 21, 2007 in force as of August 22, 2007.
(4) Except in cases where a tripartite agreement (or private deeds or notarial acts) has been signed between the insured party/policyholder, the designated beneficiary and the insurer to formalise the designated beneficiary's acceptance of the policy's benefits.

Assurance vie offers favourable tax conditions from two points of view. You benefit from tax advantages:

• on the taxation of capital gains generated during the life of the policy,
• in the event of death, when the inheritance is passed on to the designated beneficiaries.

Tax implications if you redeem your policy

You can access the money you have invested at any time. The taxation rate on capital gains depends on the date on which you redeem your policy.

*Tax rules applicable to Frnch tax residents on Policies taken out since 26/09/1997.
**For a single individual.
***For a couple subject to joint taxation.

In order to decide between income tax and flat-rate withholding tax, you need to find out your tax bracket. A flat-rate withholding tax of 35%, plus social security deductions, may initially seem high. However, it only applies to the capital gains corresponding to the sums redeemed.

Tax in the event of death

If the designated beneficiary is the spouse or PACS⁽¹⁾ partner, the sums they receive following the death of the policy holder are tax-exempt⁽²⁾. Otherwise, the applicable tax conditions in the event of death are as follows:

Tax rules applicable at 01/09/2007 to French tax residents, subject to subsequent changes in tax legislation.
* For estates transmitted after August 22, 2007
** Allowance applicable per beneficiary for all policies taken out in their favour by the policy holder.
*** *** Allowance shared between the beneficiaries of all the policies taken out by the insured party. Find out more details about assurance vie taxation.

Find out more:
• Assurance vie summary
• Assurance vie details
• Favourable tax conditions
• A solution to meet all your goals

(1) The same conditions shall apply if, when the inheritance is distributed, the beneficiary is the brother or sister of the policy holder, and is single, widowed, divorced or separated, over 50 years of age, or suffers from an infirmity making it impossible for them to earn a basic wage, and has lived constantly with the deceased for 5 years before they died. These provisions apply to estates transmitted after August 22, 2007.
(2) TEPA law No. 2007-1223 of August 21, 2007 in force as of August 22, 2007.

Assurance vie has had such a success in France in large part because it is a multi-purpose investment vehicle regardless of your stage in life..

Build up capital

Subscribing to a assurance vie policy is an ideal way to start putting money away, however much you can afford, especially if you have just started working for the first time. The capital you gradually build up could help you buy your first home, for example. Start thinking about it now, by taking out the assurance vie policy that suits you best.

Increase your assets

Thanks to the wealth of funds on offer, you can invest the sums you pay in as you wish, according to your risk aversion: opt for maximum security by selecting our euro-denominated fund, or for maximum returns by selecting an equity mutual fund.

Tax efficiency

Of all the financial investments on the French market, assurance vie now offers some of the most attractive tax conditions. The capital gains generated each year are only subject to tax if you redeem your policy.

Prepare for retirement

Assurance vie lets you build up capital gradually and enhance your earnings in the long term: it is a great solution to build an income supplement under advantageous tax conditions, to help make up for the decrease in income when you retire.

Manage gifts

For years, the public authorities have been encouraging wealth transmission before death by regularly raising tax allowance thresholds, which vary according to the relationship between the donor and the beneficiary. However, many potential donors hesitate as they are uncertain how the beneficiary will use the funds they receive. Thanks to a special agreement (or official deed), you can now make a donation whilst maintaining a degree of control over the funds.

In exchange for your donation, you can request that the beneficiary:
- invests the given sum in a assurance vie policy,
- or define the age at which the beneficiary will be able to use the funds freely,
- or even request that any changes made to the policy (redemption, fund switching, etc) is first approved by you. You define the rules so that you can be sure that the money you give will be put to good use.

Leave an inheritance

Assurance vie has always offered highly attractive tax advantages for passing on wealth. As it is not included in the estate, a assurance vie policy lets you pass on additional capital:

• To protect your spouse or your PACS partner: regardless of when you made payments into your policy, the capital will be passed on to your surviving spouse or PACS partner, with no death duties ⁽¹⁾.

• To optimise the inheritance you leave to your children: you can pass on up to € 152,500 to each child designated as a policy beneficiary, entirely tax-free⁽²⁾. This € 152,500 allowance is specific to assurance vie and comes in addition to the direct line allowance of € 151,950 granted for inheritances⁽³⁾.

• To pass on your wealth to any other person or third party of your choice: assurance vie allows you to circumvent the rules governing inheritance.

Do you want to invest in mutual funds, given that they let you benefit from the long-term performance of the financial markets, whilst ultimately leaving an inheritance? Consider our "Garantie Plancher" when you sign up: this guarantee ensures that your designated beneficiaries will receive your net invested (and non-redeemed) payments in the event of death⁽⁴⁾. In this way, the risks you take will have no effect on your loved ones!

Find out more:
• Assurance vie summary
• Assurance vie details
• Favourable tax conditions
• A solution to meet all your goal

(1) According to the TEPA law No. 2007-1223 of August 21, 2007 in force as of August 22, 2007, for estates transmitted from this date.
(2) Find out more details about assurance vie taxation.
(3) Provided for by the TEPA law and revised by the Loi des Finances, 2008.
(4) Subject to the terms and conditions set out in the policy information leaflet.