For British nationals living in France, understanding how to manage savings and investments under a different legal and tax system can be challenging. However, one financial structure stands out for its flexibility, efficiency, and long-term planning benefits: the French Assurance Vie.
Understanding Assurance Vie
The Assurance Vie is a cornerstone of financial planning for residents in France. Despite translating as “life insurance,” it is best understood as a long-term savings and investment wrapper regulated under French law. Unlike traditional UK life insurance products, an Assurance Vie allows policyholders to invest in a wide range of financial assets—such as equity funds, bonds, or diversified portfolios—while benefiting from favourable tax treatment and estate planning options.
Important clarification: While the Assurance Vie is often referred to as a life insurance contract, its primary use among residents in France is not for life cover, but for tax-deferred investment and succession planning purposes.
1. Tax-Efficient Growth
One of the main benefits of an Assurance Vie is the deferral of income tax and social charges while the funds remain inside the contract. Unlike UK-based investments, gains generated within the wrapper are not taxed annually. Tax is only triggered when you make a withdrawal (known as a rachat), and even then, you are only taxed on the gains portion, not on the full amount withdrawn.
After the policy has been in place for eight years, withdrawals enjoy significantly more favourable tax treatment:
- Annual tax-free allowance on gains: €4,600 for single individuals and €9,200 for couples filing jointly
- Preferential tax rate: Gains are taxed at a flat rate of 7.5% (plus applicable social charges) on policies under €150,000 per person
This combination allows your investments to accumulate more efficiently, with the potential to reduce your overall tax burden over time, particularly in retirement.
⚠️ Note: Tax rules can change and may vary depending on your specific circumstances. You should always seek advice from a regulated tax or financial professional.
2. Inheritance Planning Advantages
One of the most distinctive features of the Assurance Vie is its flexibility in succession planning. Under French inheritance law (la réserve héréditaire), certain heirs—such as children—are legally entitled to a fixed share of your estate. This can limit your ability to pass wealth freely to a surviving spouse, unmarried partner, or other chosen beneficiaries.
However, amounts held within an Assurance Vie are generally treated separately from your estate for French inheritance purposes, provided the policy was set up before age 70 and beneficiaries were named in the contract.
- Each beneficiary can receive up to €152,500 free of French inheritance tax
- Amounts above this threshold are taxed at progressive rates, starting at 20% and capped at 31.25%
- Policies funded after age 70 offer a smaller exemption of €30,500 (shared among all beneficiaries), but any growth on the policy may still be tax-exempt
This makes the Assurance Vie an extremely valuable tool for passing wealth on to future generations or non-relatives, especially for expats with complex family arrangements.
3. Currency Flexibility & UK Remittance Protection
British nationals in France often hold assets in GBP or have income from UK pensions and investments. Many Assurance Vie providers offer policies denominated in GBP, EUR, or USD, helping you manage currency exposure based on your personal situation.
Moreover, for UK non-domiciled individuals who may return to the UK at a later stage, certain Assurance Vie structures can help protect against UK taxation under the remittance basis. Although this is a specialist area, it may be relevant for mobile international clients who maintain cross-border financial interests.
⚠️ Disclaimer: Cross-border taxation can be complex. The suitability of an Assurance Vie depends on your residency status, domicile, and long-term financial goals. You should always seek personalised professional advice before making decisions.
4. Investment Options and Control
Assurance Vie contracts typically offer a wide menu of underlying investment choices, ranging from cautious euro funds (fonds en euros) with capital guarantees, to actively managed multi-asset funds and unit-linked options (unités de compte).
This allows expats to build a portfolio tailored to their risk tolerance and objectives, while still benefiting from the tax advantages the wrapper provides.
Policies are generally portable across France, and in some cases can be retained if you later relocate within the EU (subject to legal and tax implications in the new jurisdiction).
5. Retirement Income Planning
Many British retirees in France rely on pension income from the UK, which is taxable in France under the UK–France Double Taxation Treaty. However, an Assurance Vie can complement this by offering a flexible, tax-efficient drawdown mechanism.
For example, you can:
- Supplement your UK pension with selective withdrawals from your Assurance Vie, taking advantage of the eight-year allowance
- Strategically manage income in retirement to stay within French tax bands
- Smooth investment gains over time, rather than being taxed on irregular spikes in income
This makes the Assurance Vie a valuable income-smoothing tool, especially for those seeking to optimise retirement cash flow.
Key Considerations
Before setting up an Assurance Vie, it is important to understand:
- The contract structure, provider jurisdiction, and currency denomination
- Charges and fees, which may vary depending on the provider and underlying funds
- The impact of UK tax rules if you return to the UK or retain UK domicile
- The need for a regulated intermediary, ideally one authorised to give cross-border advice under the EU Insurance Distribution Directive (IDD)
You should also ensure the provider is licensed and compliant under French regulations (Autorité de Contrôle Prudentiel et de Résolution, or ACPR) and that your adviser holds appropriate licensing under both French and UK financial services frameworks (if advising on both jurisdictions).
Final Thoughts
For British expats living in France, an Assurance Vie is far more than a savings product—it is a comprehensive, tax-efficient financial planning tool that offers investment growth, estate planning flexibility, and tax-efficient income options.
Used correctly, it can help you:
- Grow your wealth more efficiently
- Structure your legacy in line with your wishes
- Minimise exposure to French inheritance tax
- Strategically manage retirement income
However, every individual’s situation is different. Regulatory, tax, and legal considerations vary, and professional advice is essential before making any financial decisions.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
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