PER and Life Insurance: Benefits of Managed Management

Pilot management consists of individuals who delegate investment management to professionals. This management method is now widely used in the context of retirement savings plans (PER) and life insurance. Taking out PER or life insurance can provide the insured with two management methods. As the name implies, it is free management and management that gives subscribers complete freedom regarding investment arbitration. In the context of PER, management, called time-based management, has even been the default management method since October 1, 2019, since the advent of the new retirement savings plan in France. This was also the default mode for plans that were replaced by the new PER. The Group Retirement Savings Plan (Perco) since 2015, and the popular Retirement Savings Plan (Perp) since its creation in 2003. However, this is not the case. For life insurance, even though the use of managed management has become more and more democratic, whereas it was previously reserved for customers from wealth management.

Managed management on the PER horizon

For long-term managed management, the savings imposed on the PER are managed by the insurer entrusted with the delegation. Individuals save and fill their PER. And it’s up to the insurance company to choose to invest money. Investment is made on an account-by-account basis, such as a euro fund, which is generally a low-yielding asset but safe, or a stock that offers both more risk and a more attractive return outlook. With this choice, insurers do so in a legally structured way, depending on their age and investor risk acceptance profile.

The law provides for three risk acceptance profiles. A “Prudent Retirement Period” profile, an intermediate profile (default profile), a “Balanced Retirement Period” profile, and finally a “Dynamic Retirement Period” for those who are less likely to take risks. The most risky “horizon” profile. The arbitration of the insurance company responsible for steering must respect the minimum statutory share of savings invested in low-risk assets. This share will increase as the retirement date approaches. Therefore, for individuals with a cautious profile, low-risk assets must account for at least 30% of the unpaid amount of the plan 10 years before retirement (there is no obligation for a balanced risk profile). Its share should reach: At least 90% within 2 years of retirement. The law regulates time-based management to limit financial risk as subscribers approach retirement.

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Benefits of managed management of life insurance

Unlike free time-based management, life insurance management is, in principle, costly, but it also has its advantages. Again, the main concern for investors is to leave media choices to the experts, identifying the best opportunities for savers. This arbitration will also be conducted according to the investor’s risk profile determined by the detailed questionnaire to be filled out. If good returns are not guaranteed, professionals usually have the expertise to know better about the market and the best support compared to regular investors.

The managed management of life insurance can be global. That is, all of the money invested may be managed or partial by the insurance company. In the latter case, so-called multi-compartment management allows individuals to manage parts of their contracts for free, thus diversifying some of their savings.

How about free management?

Whether used for PER insurance or life insurance, managed management completely relieves savers of administrative constraints. This is the most appreciated solution not only for beginners, but also for investors who do not have time to arbitrate their investment.

On the other hand, individuals who want to manage everything from a savings perspective, or who want to spend their time investing because they want to manage it, move to logically free management. Choosing free management is an obligation for investors to determine for themselves the support and distribution that exists in their financial investment. You need both to have a good knowledge of the various existing financial support and to follow the financial markets enthusiastically so that you can make the right decisions at the right time. Two prerequisites that are not required for subscribers who choose managed management.

(By the editorial staff of hREF agency)