Ordinary account, PEA, life insurance: where to lodge your funds?
To make the most of the good market performance actions, you have to choose a suitable framework to house your funds. There are three main ones.
The Ordinary Securities Account
This is a classic securities account which allows the greatest flexibility thanks to movements (deposits / withdrawals) possible at any time. It is however handicapped by an unattractive tax system since capital gains are subject to social security contributions (15.5%) and to the income tax scale. However, there are three special cases in which an ordinary securities account can dispense with this:
- if there are possible compensations with previous losses carried forward.
- when transmitted free of charge, by donation or succession, securities that have accumulated unrealized capital gains.
- when the declarable income does not reach the first tranche of the IR.
The Stock Savings Plan (PEA)
The PEA certainly remains an excellent framework for investing in equity funds. With particularly attractive taxation when you keep this account for at least 5 years. It allows you to invest up to € 150,000 (€ 300,000 for a couple) in funds eligible for the PEA. In principle, only shares issued by companies having their registered office in a country of the European Union as well as in Iceland or in Norway can be placed on your PEA But if you invest through UCITS, these funds are only required to invest 75% of their portfolio in European equities: the remaining 25% can be invested at the choice of the manager in equities from other geographic areas, in bonds or money market securities. Taxable capital gains are not immediately taxable. They will be exempt, partially for withdrawals made between 2 and 5 years after the opening of the plan and totally beyond. In the event of a donation or inheritance, the PEA must first be closed and undergo social security contributions at variable rates depending on the period in which they were made. The PEA thus does not benefit from any advantage for free transfers (donations and inheritances).
Life Insurance
You can also subscribe to UCITS through contracts oflife insurance multi-media. You will no longer be limited to European equities, as in the PEA and you will be able to compose your own portfolio by taking advantage of a wide choice of funds eligible for your multi-support contract. If your contract is more than 8 years old and if the annual amount of capital gains included in your withdrawals does not exceed € 4,600 (€ 9,200 for a couple), the withdrawals will then be tax exempt, only social contributions will be payable. The capital transferred during the unwinding of a life insurance contract is exempt from inheritance tax provided that the subscriber has made his payments before the age of 70.
Considerable costs that can be avoided
Minimize the fees charged by intermediaries (Banks and Insurance Companies) it is possible. This is to avoid the entry and exit fees or arbitrage fees often levied on every trade, plus a variety of annual fees. It is advisable to adopt a “low-cost” solution which presents practically only advantages, by operating with an online bank which offers a sufficient range of so-called 0% funds, ie. without entry or exit rights. The main online banks that offer this service today are Boursorama (Société Générale), BforBank (Crédit Agricole) and Fortuneo (Crédit-Mutuel ARKEA).
Conclusion
By minimizing the fees charged by intermediaries and by subjecting yourself to the most favorable tax regime, you can considerably improve the bottom line of your investments. Depending on the case, the profitability gain may reach 2% to 6% per year, or even more. Imagine the cumulative savings after several years! If you are not careful these two types of withdrawals, often very high and sometimes repetitive, will severely reduce your earnings.