After the shock of the result of the European elections and the dissolution of the National Assembly, concern is palpable among many individual investors. The potential arrival of an extremist party in government does not bode well in terms of savings. In the short term, the wealthiest fear a pure and simple drain on their capital to replenish the state coffers. In the longer term, a deterioration of the economic situation, an increase in taxation, or even a weakening of the euro are among the feared scenarios. “The current reaction of savers is similar to that which we experienced in 2012 during the election of François Hollande, who announced that he wanted to tax the rich, notes Patrick Thiberge, the general director of Meilleurtaux Placement. We then attended “significant capital outflows from wealthy clients.”
For the latter, Luxembourg is an El Dorado, as much for its regulatory stability and financial solidity as for its sophisticated heritage engineering. Accessible to French households, who form half of its clientele, Luxembourg life insurance may be an answer to consider. “Any form of uncertainty encourages our clients to protect their savings in the face of a risk of systemic crisis, underlines David Liebmann, deputy sales director for Europe at Lombard International. In the days following the result of the European elections, some French residents and partners questioned us about the functioning of this contract, and about the Luxembourg regime, in order to find elements of comfort.”
Local rules, favorable to investors
Firstly, isolating your assets in a life insurance contract, whatever it may be, allows you to protect yourself in the event that securities taxation is called into question. The securities account is currently taxed at 30% but this flat tax could be raised in the future. Opting for a Luxembourg envelope also allows you to benefit from local rules, which are very favorable to investors. Starting with the “security triangle”, which is based on a strict distinction between the company’s own assets and customer outstandings. It takes the form of a tripartite agreement for the deposit of funds between the insurance company, one or more banks holding the capital and the insurance supervisory authority in Luxembourg. If a bankruptcy were to occur, customers’ money would thus be protected from any seizure.
“The client also benefits from a “super privilege”, in the event of the bankruptcy of an establishment, which allows him to be a priority creditor to recover his capital,” adds David Liebmann. In France, protection, in such a situation, is limited to the Personal Insurance Guarantee Fund (FGAP), which protects each insured person up to 70,000 euros per insurance company. Luxembourg contracts also allow you to choose banks outside the euro zone, and to place your assets in investment vehicles denominated in Swiss francs or in other currencies.
Contracts excluded from the Sapin 2 law
Another concern: the activation, in France, of the Sapin 2 law, which allows the High Financial Stability Council to temporarily limit buybacks and arbitrations in the event of a crisis. “This is the first cause of concern for people who contact us,” confides David Liebmann. However, Luxembourg unit-linked contracts are not affected. For those marketed by subsidiaries of French groups and including a fund in euros, the reality is more complex because most of these supports are reinsured by the parent company, based in France.
On the other hand, despite its charms, Luxembourg life insurance does not allow you to escape French taxation, since this system is transparent: it adapts to the rules of the subscriber’s country of residence. Which is nevertheless very practical for candidates for exile, who would go so far as to relocate their tax residence. However, only policyholders with solid assets will be able to benefit from these advantages, with most of these contracts requiring a minimum initial payment of 250,000 euros. “Below one million euros of financial assets, the question does not arise,” assures Patrick Thiberge.
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