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Understanding Assurance Vie Withdrawals and Taxation: A Guide for British Expats in France

If you’re a British expat living in France, you’ve probably heard of assurance vie—a popular and flexible investment product widely used for long-term savings, tax optimisation, and estate planning. But while the benefits of assurance vie are well publicised, the rules around how withdrawals are taxed can be more complex, especially for those navigating cross-border finances.

In this article, we break down how assurance vie withdrawals are taxed and explain why working with an experienced financial adviser can help you manage your wealth effectively and avoid potential pitfalls.


What Is Assurance Vie?

Assurance vie is a life insurance-based investment wrapper that allows policyholders to invest in a wide range of funds and benefit from favourable tax and estate planning rules. It is one of the most tax-efficient savings and investment vehicles available in France, making it a cornerstone of many expats’ financial strategies.

Unlike standard savings or investment accounts, assurance vie allows for flexibility in investment choices, deferred taxation, and the ability to name beneficiaries outside of the standard French inheritance rules.


How Are Withdrawals Taxed?

The main taxation of an assurance vie policy occurs only when you make a withdrawal, whether it’s a full surrender or a partial withdrawal. This key feature means your investments can grow tax-deferred for years, which may support compounding to work in your favour.

1. Income Taxation on Withdrawals (Surrenders)

Full Withdrawal:

In a full surrender, the taxable gain is calculated as:

Taxable Gain = Final Value – Total Premiums Paid

This portion of the gain is then taxed depending on the age of the policy and the amount invested.

Partial Withdrawal:

Partial withdrawals are more complex. Fortunately, the insurance provider handles the calculation and provides a tax breakdown. The taxable gain is proportionate to the size of your withdrawal compared to the total policy value:

Taxable Gain = (Amount Withdrawn – (Total Premiums Paid × Amount Withdrawn / Total Value))

This formula ensures only the gain portion of the withdrawal is taxed.


2. Tax Rates Based on Policy Duration

Policies Held for Less Than 8 Years:

  • Flat Tax (Prélèvement Forfaitaire Unique): 12.8%
  • Social Charges: 17.2%
  • Total Taxation: 30%

Policies Held for More Than 8 Years:

  • Reduced Tax Rate: 7.5% on gains linked to the first €150,000 of premiums (per person), plus 17.2% social charges
  • Total Taxation: 24.7%
  • Annual Tax-Free Allowance:
    • €4,600 for single individuals
    • €9,200 for married couples or those in a civil partnership

This tax allowance is applied to the gain element, meaning regular smaller withdrawals can be made tax-free within this limit after the 8-year threshold.


Other Tax Benefits of Assurance Vie

3. No Tax on Fund Switching

Assurance vie allows internal fund reallocation without triggering capital gains tax. Unlike a standard portfolio, where each fund sale or switch could generate a taxable event, assurance vie lets your money remain invested and rebalanced without immediate tax consequences. This gives you more flexibility to adapt to market conditions or investment goals.


4. Wealth Tax (IFI) Implications

Assurance vie policies are generally not subject to the French wealth tax (Impôt sur la Fortune Immobilière, or IFI), unless they include real estate assets. If your policy holds unit-linked funds with real estate exposure, only the proportion of the surrender value linked to real estate is considered for IFI. This can be an important factor for HNWIs managing diversified portfolios.


5. Inheritance Tax Efficiency

One of the most attractive aspects of assurance vie is its use in estate planning. It allows you to distribute wealth directly to named beneficiaries—often outside of the rigid French forced heirship rules—and with preferential tax treatment.

For premiums paid before age 70:

  • Each beneficiary receives a €152,500 tax-free allowance.
  • Any amount above this is taxed at:
    • 20% up to €700,000
    • 31.25% beyond that

For premiums paid after age 70:

  • A total €30,500 exemption applies across all beneficiaries.
  • Above this, standard French inheritance tax rates apply (based on relationship and amount inherited).

Additionally, spouses and PACS partners benefit from complete inheritance tax exemption, making assurance vie an efficient intergenerational wealth transfer tool.


Why Expats Should Work with a Financial Adviser

Understanding the technicalities of French tax law, succession planning, and investment regulations can be daunting—especially for expats who may also have obligations or assets in the UK or elsewhere.

A regulated financial adviser can help you:

  • Choose the right assurance vie provider: Some are more suitable for expats than others, especially in terms of language support, currency options, and reporting standards.
  • Optimise your withdrawal strategy: Coordinate with your tax adviser to make use of tax-free allowances and choosing the best time to withdraw can have a significant impact on your net returns.
  • Plan cross-border estates: Ensuring your assurance vie fits seamlessly with your UK or global estate planning strategy is crucial.
  • Avoid hidden costs: Many firms operate on commissions. At Blacktower, we offer transparent, tailored financial planning without hidden fees, so you stay in control.

FAQs About Assurance Vie

1. Can non-residents open an assurance vie?
Typically, assurance vie is designed for French residents, but some providers accept non-residents depending on their country of residence. Always check with a qualified adviser.

2. Can I access funds at any time?
Yes. Assurance vie is highly flexible. You can make withdrawals at any time, though tax may apply depending on your policy’s age and gain.

3. What happens if I leave France?
Your policy remains intact, but your tax situation may change. You may become subject to new rules based on your residency. International financial advice is crucial.

4. Can I name multiple beneficiaries?
Yes. You can name as many beneficiaries as you wish, and each may benefit from the applicable tax exemptions.

5. How does it differ from a regular investment portfolio?
The main differences are tax deferral, inheritance benefits, and the ability to rebalance funds without capital gains tax. These features make it especially attractive for long-term wealth planning.


Take Control of Your Financial Future

Assurance vie is more than just a savings product—it’s a powerful, flexible, and tax-efficient tool that can support your financial goals, protect your family, and secure your legacy. But to unlock its full potential, it’s vital to understand how taxation works and structure your investments wisely.

At Blacktower Financial Management, we specialise in helping British expats across France build effective financial strategies tailored to their unique circumstances. Whether you’re considering opening an assurance vie or looking to optimise your current policy, our expert advisers can help you navigate the rules, minimise taxes, with potential to grow your wealth with confidence.


Book a Free Consultation Today

Get in touch with a Blacktower adviser for bespoke guidance on how to plan for your assurance vie investment. .

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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Final salary pensions – why now is a good time to cash in

Juicy lottery-sized sums are being offered to savers to tempt them out of gold-plated workplace pension schemes and into personal plans. We’ve explored whether you should consider taking a final salary pension, as well as the benefits and drawbacks of withdrawing.

What is a final salary pension?

A final salary pension, sometimes referred to as a gold-plated pension, is a special style of retirement fund that is based on your final or average salary.

The main difference between this and a defined contribution pension is that a final salary scheme gives you a guaranteed sum annually for the rest of your life when you retire.

To work out the value of your final salary scheme, consider a few factors: 

  1. Your final or average salary at your place of employment (confirm this with your employer)
  2. Your length of service
  3. The final salary scheme’s accrual rate (this is often 1/80th)

Your final salary pension will take each factor into account, and the resulting figure will be the guaranteed annual sum you are entitled to.

For instance, if you worked somewhere for ten years, and leave on a salary of £100,000, with an accrual rate of 1/80th, you will have a guaranteed retired annual income of £12,500.

It is possible to undertake a final salary pension transfer. Depending upon how long you expect to enjoy retirement, this could be a favourable choice. However, it’s important to consult a financial advisor to make your final salary pension transfer values work harder.

What are the benefits of transferring a final salary pension?

Assessing your final salary pension transfer value, you might consider it worthwhile to withdraw. We’ve outlined the main benefits of taking your final salary pension:

Receive the cash value of your final salary pension

Withdrawing from a final salary scheme allows you to receive a cash lump sum in return for forfeiting your guaranteed income in retirement. This final salary pension transfer value is the main reason to withdraw from a scheme, as it offers you financial freedom.

Remove ties with your employer

This is an especially important point if you’re concerned that your employer may not exist throughout your full retirement. For most, the pension protection fund (PPF) will cover your pension, but, for especially high earners, there is a PPF ceiling of £41,461 (as of April 2020).

Enjoy a flexible income in your retirement

A final salary scheme entitles you to a guaranteed annual income when you retire, but if you go down the route of transferring your final salary pension you will be able to enjoy a little more flexibility in how you receive your income. Usefully, by withdrawing from your final salary scheme, you can choose to take more out in your younger years.

Choose how you want to invest your pension

A final salary scheme is controlled tightly to accommodate all employees and their interests. When withdrawing from the scheme, however, you can take complete control over how your pension fund is invested.

The considerations you should make before transferring your final salary pension

While there are certainly benefits of going down the route of transferring final salary pension funds into various other pots, it’s important to consider what you’ll be giving up:

  • Entitlement to a fixed annual income for the rest of your life
  • A safe income that doesn’t fluctuate with volatile markets and share prices
  • Spousal and family benefits that come with a final salary scheme

 Example: Should I cash in my final salary pension?

An example is Mrs Dee (not her real name), 4 years ago she asked for her final salary transfer values, which came in at £250,000 – a nice sum, you may think. After reviewing all the facts and figures available, however, I advised Mrs Dee to leave her final salary pension where it was, which she duly did.

Towards the end of last year, because of favourable market conditions, I applied again to see the value of transferring her final salary . This one came in at just under £600,000.

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Brexit would prompt need for expat financial advice

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Under current arrangements UK pensioners living abroad within the EU receive full state pension increases and there are concerns that this would change if Brexit goes ahaed; leaving the UK government needing to renegotiate terms for indexed social security payments for expats living in Europe.

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