Assurance Vie Information

[graham]

Oct 2016 but probably still relevant -

Assurance Vie - what you need to know

[image] [image] For some time now, plummeting bond yields have been a concern for investors in French ‘assurance vie’ policies. Are life insurers going to be able to pay policy holders an acceptable annual return when bonds offer ever lower or even negative returns? These funds have to guarantee capital whilst paying a bonus every year. The only way a fund manager can be sure of meeting this obligation is to put the vast majority of investors’ money into French government bonds, thus funding government debt to the tune of trillions of euros. As recently as 2007, they were paying an attractive 5% per annum net. This has now fallen to about 2.5% and are set to fall further, almost certainly to under 2% in 2016. Bond rates are at historically low levels and they should now really only be paying about 1%, but companies have been dipping into their reserves, as they fear that such a low rate would lead to a mass exodus from these policies. This has led to concerns about the financial …