Unsurprisingly, funds in euros will have offered in 2021 an average return estimated at 1.1% on average, down, as has been the case for many years. These funds, mainly invested in bonds, reflect the poor performance of the fixed income markets.
1.1% on average, before tax and without counting inflation! This is the estimated average yield for the funds in euros of life insurance contracts. A slow but steady descent of this rather specific support which offers a capital guarantee.
Funds in euros: a manna of more than 1,300 billion in assets…
Life insurance is one of the favorite products of savers, because this support has a very advantageous taxation, both from the point of view of the taxation of gains and the inheritance system.
And the euro fund, which offers protection of invested capital and a ratchet effect on past performance, has long attracted investors: out of total assets of nearly €1,800 billion, more than €1,300 are invested in euro funds! The rest, ie €400 billion, is placed in “Units of Account”, ie financial supports invested in the financial markets or in real estate. These funds offer the hope of better long-term performance but do not offer a capital guarantee each year.
Funds in euros are, for their part, very mainly invested in bonds in order to guarantee the capital invested. Only a small part (less than 15%) is diversified into equity or real estate investment products, which, in good years, boosts the rate paid to policyholders.
… But a return that no longer protects against the effects of inflation
Policyholders who have received, or will soon receive, their annual summary, therefore risk being very disappointed with the performance of their funds in euros. Moreover, around this “small” average, while some contracts still manage to post higher rates (some of which exceed 2%), others fail to cross the 1% mark! Therefore, with inflation at an average rate of 1.6% over 2021 (and 2.8% year-on-year last December), the real rate is therefore negative.
It is then necessary to deduct the social contributions, of 17.2%, and possibly the tax at the time of the exit according to the age of the contract and the amount capitalized.
“Additional” rates subject to conditions
For certain contracts, the return on funds in euros is variable: if you agree to invest a large part of your savings in a Unit of Account, the return on the euro fund increases! Because insurers seek above all to “discourage” individuals from investing too much in these funds. Two reasons for this: on the one hand, it weighs on their solvency ratio, and on the other hand, in the long term it is strongly advised to diversify its investments. Moreover, some new contracts no longer allow you to invest 100% in the fund in euros.