As every year, insurers have each in turn announced the performance returns of euro life insurance funds for the past year. So what has been the best performance life insurance of 2020? The point below.
At the start of the year, insurers communicate on the performance of their euro fund. If this secure pocket of the life insurance contract has shown ever lower returns year after year since the early 2000s, the fact remains that these results remain highly scrutinized by investors who continue to invest in these funds mainly invested in bonds and guaranteed in capital. What about the performance of the euro fund this year? How are the returns calculated? What impact has the health crisis had on the performance of the euro fund in 2020? What are the best life insurance, the euro funds that it is better to get rid of? And what will be the trends in 2021…? Here is a point by point explanation.
How are the returns calculated?
Be careful to differentiate the return on life insurance from the return on the euro fund. The return on the euro fund may in fact be identical to the return on your life insurance, but only if you have a single-vehicle contract exclusively invested in euro funds – a type of contract that is increasingly rare given the continued decline in the return. the euro fund for more than 20 years and the obligation imposed by many insurers to invest part of the sums placed on its contract in unit-linked policies. The return on the euro fund therefore only concerns sub-funds on this medium (and therefore does not concern you at all if you are invested exclusively in units of account). However, an abuse of language often leads to talk about the return on life insurance for the return on the euro fund. However, if the return on the euro fund is fixed, established every year, and identical for all investors with this euro fund, the return on life insurance is itself very variable: it depends on the percentage of the amount invested in euro funds and unit-linked funds held.
Note that the performance of the euro fund is published every year by insurers, during the month of January, and even in February. It is announced net of management fees but gross of tax and social security contributions, which will therefore have to be deducted from the earnings thereafter.
What are the impacts of Covid-19?
The euro fund is a fund mainly invested in bonds. Its composition varies according to its nature (classic euro fund, dynamic euro fund, real estate euro fund, etc.) and its manager. But the fact remains that this fund, being largely invested in bonds, is very affected by key central bank rates. However, with the Covid-19 crisis, these have been kept at a very low level, hence the very high probability that this year again, the return of the euro fund (on average) will be lower than that of the year previous.
What are the best life insurance policies?
Indeed, there is not a single return identical to all euro funds. Each euro fund has its own specific return. Once all the results have been announced, the French Insurance Federation (FFA) announces the average return on the euro fund for the past year. This average return makes it possible to distinguish between the best euro funds (those above the average) and the less good (those below the average). This year again, the average of euro funds should oscillate around 1.10% to 1.20% (against 1.40% in 2019). The best euro funds are therefore those showing a return greater than 1.40%. Some even post a much higher yield such as Carac Profileo from the insurer Carac and Afer multisupports from the insurer Aviva Vie, which each post a rate of 1.70%, or Gaipare Selectissimo from the insurer Allianz Vie which posts a rate interest rate of 1.90% for the year 2020. The euro Infra Euro security fund of the insurer Oradea Vie even succeeded in the feat of exceeding the 2% mark with a return of 2.10% in 2020.
Be careful, however, not to judge a life insurance contract solely on the performance of its euro fund. The best life insurance is not necessarily the one that allows you to invest in the euro fund with the best return. The best life insurance is that which combines high-performance euro funds with a wide choice of unit-linked support, reasonable costs, etc. It is important not to rely on the performance of the euro fund alone to judge the quality of life insurance, even if obviously the latter is one of the criteria to be used.
What life insurance should I buy back?
The worst life insurance policies must of course be redeemed, that is to say that the saver recovers the sums held on his contract (this is a redemption) and closes his investment to invest this money elsewhere. The life insurances to buy back are those that deliver a zero or anemic return. Thus, the old single-vehicle life insurance policies, with euro funds showing returns of less than 1%, should be closed, just like a large number of house life insurance contracts from large network banks which have performed well below those. displayed by the life insurance contracts of online banks or online brokers which, in addition, are also much more attractive in terms of fees and the possibility of using managed management.
Be careful, however, before making a redemption to take into account the tax precedence of the contract. If the amount held is less than 150,000 euros for a single person and 300,000 euros for a couple and the life insurance has been held for more than eight years, the gains are taxed at only 24.7% instead of 30% for a new contract. But it is better to be taxed more on a contract that pays off very little taxed on a contract that brings in almost nothing.
What to expect for 2021?
In 2021, with the continuation of the economic and health crisis, central banks should not move their key rates and returns on euro funds will remain at very low levels. Perhaps it will be the opportunity to set its sights on unit-linked support and in particular equities. Indeed, with the mass vaccination campaign started at the end of 2020 and continued since then, the economic recovery could take place from the second half of 2021, with however inequalities between sectors. But the stock markets could boost the performance of life insurance contracts again, provided you accept to take risk and invest for the long term.
–
