Tax
PER or life insurance: the right move based on your tax bracket
The question comes up at every meeting. A structured, numbers-based answer, no sugar-coating, with the one criterion that actually decides it.
Camil Czajkowski
Founder · Le Chêne Patrimonial
“PER or life insurance?” I haven’t counted, but I must hear this question ten times a week. The truth is that it’s almost never one against the other. The two vehicles serve different logics. What matters is understanding which one to activate first given your situation, and then making them work together.
The criterion that actually decides it: your marginal tax rate
Your marginal tax rate (TMI, France’s income tax bracket) determines whether the PER (Plan d’Épargne Retraite, France’s individual retirement savings plan) is economically worthwhile for you today.
- TMI at 0% or 11%: the PER has almost no tax advantage. You deduct income that is lightly taxed, only to come out later at an equivalent tax rate, all while locking up your savings. Life insurance is almost always preferable.
- TMI at 30%: the PER becomes worthwhile if you expect a lower TMI in retirement. Run the numbers on a typical contribution: that’s the real test.
- TMI at 41% and 45%: the PER is a major lever. The gap between your active TMI (41 to 45%) and your TMI in retirement (often 30%) represents 10 to 15 points of net tax saved on every euro contributed. Over a 15-year horizon, that adds up considerably.
What life insurance does that the PER doesn’t
- Permanent availability: you can withdraw whenever you want (with tax treatment varying by how long the contract has been open).
- Optimised wealth transfer: €152,500 per beneficiary for payments made before age 70, outside the estate. The PER has a more uneven tax treatment on this front.
- Tax treatment smoothed over time: after 8 years, an annual allowance (€4,600 or €9,200) lets you draw tax-free supplements.
What the PER does that life insurance doesn’t
- Immediate deduction from taxable income: a real, tangible tax saving in the year of the contribution.
- Early withdrawal to buy your primary residence: an exceptional case that makes the PER almost always justifiable for a first-time buyer in a high tax bracket.
- No impact on the overall cap on tax loopholes: unlike Pinel, Girardin, and similar schemes.
The solid strategy for 80% of profiles
For most of the clients I work with, the logic runs as follows:
- Build a life insurance base first (at least 8 years of seniority, ideally two contracts for a couple).
- Activate the PER once your TMI reaches 30% or higher, calibrating the annual contribution to the target tax saving.
- Reinvest the tax saving generated by the PER into life insurance or a PEA (Plan d’Épargne en Actions, France’s tax-advantaged equity savings plan), for a double leverage effect.
- Plan the PER exit by withdrawing in stages at retirement, to smooth out the tax impact.
A PER without an exit strategy is a tax time bomb. Life insurance without capitalisation is an expensive current account.
The concrete numbers
Take a self-employed executive, single, in the 41% tax bracket.
| Scenario | Contribution | Tax saving | Horizon | Projected gross capital (5% net) | Estimated exit tax |
|---|---|---|---|---|---|
| PER | €10,000 | €4,100 | 20 years | €26,500 | ~€7,000 (30% TMI) |
| Life insurance | €10,000 | 0 | 20 years | €26,500 | ~€3,000 (flat tax + social charges) |
Net tax gain from the PER versus life insurance on this contribution: around €5,000, not counting the reinvestment effect of the tax saving.
The mistakes that cost the most
- Opening a PER at an 11% TMI just “to do something”: you lock up savings for almost no benefit.
- Leaving your life insurance 100% in euro funds for 10 years: you erode your purchasing power.
- Choosing purely on the headline return without looking at the fees (poor unit-linked management fees can eat 1 point of annual performance, or 25% of cumulative return over 20 years).
The question to ask yourself now
Rather than “PER or life insurance?”, ask yourself: what is my TMI this year, what TMI will I have at 65, and how much could I contribute without jeopardising my liquidity? The answer to these three questions builds 90% of the strategy.
If you’d like us to run these numbers precisely on your situation, that’s the first thing we’ll do together at our discovery meeting.
