(Image credits: Unsplash – Chris Barballis)
SCPI, with a turnover of 4.45% in 2021, attracts investors who are attracted by the return on this investment as well as the tangible nature of the property. So collection started to rise again in 2021 after a big drop in 2020 due to the health crisis. It is not uncommon for individual investors to want to invest in sustainable intensification of crop production via life insurance, an investment that the French particularly value. Are you planning to buy SCPI shares of a life insurance contract? Are you hesitant to buy direct? Operation, Advantages and Disadvantages: Find out in this article everything you need to know about investing in SCPI through life insurance to make the right decision.
How it works ?
There are two ways to buy SCPI shares. The first solution, the most well-known and the one that first comes to mind, is direct purchase of shares from your bank or wealth management advisor or directly from the management company. But it is also possible to invest in sustainable intensification of crop production through a life insurance contract. In fact, life insurance is an envelope that allows you to invest in a fund in Euros and / or in units of account or UC. These unit-linked modules allow investors to invest in the stock market (via equities, traditional UCITS, ETFs or even structured products), but also in the commodity market (via ETFs for example), as well as in the real estate market via SCPIs, OPCIs, SCIs, etc.
Be careful but this is not systematic. In fact, you can only invest in SCPIs with your life insurance contract if it includes this type of unit-related support. Not all life insurance contracts allow you to invest in SCPI. Additionally, those offering it have a limited range of SCPI, more or less comprehensive depending on the decade. If you specifically want to invest in a particular crop production par project, check if it can be accessed through a life insurance contract and which or who distributes it.
What are the advantages?
The number one advantage of investing in SCP via life insurance is the ease of access and the simplicity with which you can invest. No need to resort to a wealth management advisor or management company, you can invest very easily from a versatile and accessible investment, especially if you are getting life insurance online. A few clicks will allow you to select one or more SCPIs from the Support Units associated with your unit.
Another advantage: liquidity. Investing in SCPI is not necessarily very liquid and unit owners may encounter difficulties in the event of reselling in the secondary market. If he does not find a buyer quickly, he will have to either wait or lower his price. However, with investment by life insurance, this defect is erased since the conclusion of the contract with the insurance company. So you can resell your SCPI units more easily by selling your corresponding UC line.
Finally, investing in SCPI through a life insurance contract allows you to put yourself on rocky paper while taking advantage of the tax benefits of life insurance, and there are plenty of them. First, 8 years after the contract is made, an allowance of €4,600 per person and €9,200 for a couple applies each year to gains from redemptions. In addition, if the surpluses are less than €150,000 per person and €300,000 for a couple (all contracts combined), the winnings are taxed at only 24.7% (flat-rate tax at discharge 7.5% + social contributions of 17.2%) against a flat rate tax of 30% for contracts of less than 8 years. In addition, life insurance also allows you to take advantage of tax benefits in terms of inheritance. Thus, for payments made before the insured’s 70th birthday, the beneficiary receives contract money without inheritance tax up to €152,500, with a flat rate tax of 20% thereafter, then €31, 25% above €700,000. For payments made after the insured’s 70th birthday, the beneficiary receives policy funds without inheritance tax of up to 30,500 euros. Moreover, taxes are applied according to the inheritance tax scale. Interest and capital gains on payments after age 70 are fully exempt.
Also Read: How To Increase Your Life Insurance Return By Taking As Less Risk As Possible
What are the disadvantages?
But investing in SCPI through a life insurance contract has not only advantages. First, with this solution, the investor will not be able to take advantage of the credit leverage of the investment. In fact, it is possible to obtain a mortgage to purchase SCPI shares only if the shares are purchased directly.
Then, the profitability of SCPI is reduced by the costs inherent in the life insurance contract (management fees and any entry fees). Even if life insurers highlight the fact that the subscription price for SCPI is lower than it is for direct investment, with a discount of around 2%, it is important to remember that specific management costs applied to all units of account affect overall performance.
You should also know that according to SCPI and the rules of the insurance company, the distribution of rent paid on the contract can be amputated by part.